- Wilkinson to step away from role
- Underlying business trading well
- Second 35p/share special dividend
It was a day of mixed emotions as homewares retailer Dunelm (DNLM) posted a positive first-half sales performance at the same time as revealing chief executive Nick Wilkinson was stepping down after seven years at the helm.
The shares dropped as much as 34p or 3.5% to 937p before stabilising at 955p for a loss of 1.7% or 16p.
POSITIVE UNDERLYING TRENDS
For the six months to December, revenue grew by 2.4% to £894 million driven principally by higher volumes and online orders which accounted for 39% of total sales.
The firm continued to grow its active customer base and its market share, which reached 7.8% from 7.6% the previous year according to GlobalData.
Despite keeping prices down and ‘maintaining our value proposition’, the group increased its gross margin slightly to 52.8% through productivity improvements and a tight grip on expenses.
As well as a small increase in the ordinary dividend to 16.5p per share, the firm announced another special dividend of 35p per share while maintaining its outlook for full-year earnings.
Dunelm also said it was encouraged by the start to second-half trading, which tallies with the publication today of the latest BRC-KPMG survey showing retail sales rose by 2.6% in January including an increase in non-food sales.
The only fly in the ointment was the news Wilkinson was stepping away from full-time executive life after guiding the business through Covid and building it into a network of close to 200 stores.
ANALYST VIEWS
Analysts at Panmure Liberum described today’s update as ‘a curate’s egg’, with evidence of a slowdown in top line momentum offset by market share gains and ‘encouraging’ trading.
While the special dividend is ‘reassuring’, the valuation ‘is by no means demanding’ at a 2025 PE (price-to-earnings) ratio of 12.7 times, although they see a risk of earnings downgrades to future years due to cost headwinds.
Mark Photiades, analyst at Canaccord Genuity, concurred in terms of the multiple, which he argues ‘offers good value given the group’s market-leading position and ongoing growth potential’.
‘Alongside robust margins, high levels of cash generation have supported substantial shareholder returns, totalling £1.5bn+ since IPO in 2006, and we see scope for further returns whilst operating within a disciplined capital allocation policy,’ adds the analyst.
