- Continues to take homewares market share
- Dunelm insists sales remain ‘robust’
- Dividend lifted 14.3%
Shares in Dunelm (DNLM) improved 3.4% to 747.5p after the UK’s leading homewares retailer delivered a near-35% jump in annual pre-tax profits despite the worsening consumer backdrop.
There was relief as the cash-generative bedding, curtains and kitchenware seller insisted sales have ‘remained robust’ in the first ten weeks of the new financial year in the face of cost-of-living challenges, albeit below last year’s tough comparative which benefitted from the reopening of brick and mortar stores and associated pent up consumer demand.
The FTSE 250 retailer also assured investors it is on track to achieve the £178 million of pre-tax profit called for by analysts for 2023 despite inflationary cost pressures and the squeeze on consumer spending.
DUNELM DELIVERS, AGAIN
Results for the 53 weeks to 2 July 2022 showed a 34.9% surge in pre-tax profits to £212.8 million on total sales up 18.4% to over £1.58 billion, as Dunelm’s stores were open for an entire year after two years of pandemic-related disruption.
Dunelm continued to take share market share, with furniture ranges performing particularly, and benefited from growth in new shoppers with a 8.5% rise in active customers over the year.
Digital channels also traded well, making up 35% of total sales over the year, up from 20% in pre-Covid 2019. And having paid two special dividends during the year, Dunelm bumped up the total dividend by 14.3% to 40p per share.
WELL PREPARED TO WEATHER STORM
Dunelm, which has an unwavering focus on offering shoppers outstanding value, said sales have remained robust in the first ten weeks of the new year, in which it expects to deliver a healthy gross margin of 50% despite inflationary pressures.
CEO Nick Wilkinson commented: ‘We feel confident and well prepared to weather the current economic pressures - we emerged from an unprecedented global pandemic as a bigger, better business and we believe we have the tools in place to do that again. That said, the operating and economic environment is extremely challenging.’
In this environment, his charge has to ‘make every pound count, both for ourselves through our tight operational grip and cost discipline, and for our customers, through our offer of outstanding value at all price points.
‘Dunelm, at its heart, offers customers great choice and value. Now is not the time for us to shy away from that, but for us to fully embrace it; whether it’s our Winter Warm collection or our Student Essentials range, we think Dunelm's unique and market-leading offer is more relevant than ever before.’
THE EXPERT’S VIEW
Russ Mould, investment director at AJ Bell, commented: ‘Looking in the rear-view mirror Dunelm can only see sunny skies as it reports another record profit. But a glance through the windshield reveals a massive consumer cloud about to break over the business.
‘Dunelm hasn’t faced a heavy shower yet. Sales have remained “robust”, albeit modestly lower year-on-year in the first 10 weeks since the year end on 2 July, and that is testament to the company’s skills as a retailer.
‘For now, the company is sticking with full-year forecasts. But even Dunelm can’t change the economic weather and it seems likely sales will eventually suffer as people wait a bit longer to replace that duvet set or pair of curtains.
‘As the retailer desperately tries to make “every pound count”, to use the language of chief executive Nick Wilkinson, doing what it can to keep a lid on costs and offer customers value, there may be some confidence that it can emerge from the storm a stronger business.
‘Like other survivors in the retail space, Dunelm should benefit from market share gains as smaller and weaker rivals fall by the wayside.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) owns shares in AJ Bell.
