Homewares retailer Dunelm (DNLM) was the big FTSE 250 winner on Wednesday, its shares darting 8.8% higher to £13.99 after the curtains, quilts and kitchenware seller upgraded annual profit guidance.
Dunelm, which returned to the dividend list at the half-year stage back in February, also declared a special dividend of 65p, demonstrating management’s confidence in the growth prospects of the business.
DIGITAL DELIVERY
For the year ended 26 June 2021, pre-tax profits powered 44.6% higher to £157.8 million on total sales up 26.3% to £1.34 billion.
These strong results were delivered despite Dunelm’s brick and mortar stores being shuttered for more than a third of the financial year amid pandemic-induced lockdowns.
Thankfully, its well-invested online business continued to thrive and drive significant market share gains as lockdown brought about a big surge in homewares spending in order to make the home a nicer place to be.
As CEO Nick Wilkinson explained: ‘The digital investments we had made enabled us to rapidly adapt to the changing environment and deliver strong growth and an improved customer experience.’
MODEST EARNINGS UPGRADE
In the absence of any Covid-related restrictions, Dunelm now expects that pre-tax profits for the current financial year will be ‘modestly ahead’ of the top of analysts’ £153 million-to-£175 million range following a better-than-expected start to the new year.
The retailer has said it has seen ‘encouraging’ sales growth in the first ten weeks, including a positive response from customers to its summer sale in July and ‘continued outperformance versus the homewares market’.
DIVIDEND DELIGHT
With £128.8 million of net cash in the coffers at last count, Dunelm declared a final dividend of 23p, taking the annual ordinary dividend to 35p and reflecting ‘our strong performance and confidence in future growth’, while also delighting income-seekers by announcing a special dividend of 65p on top.
Wilkinson insisted Dunelm is ‘emerging from the pandemic as a stronger and better business, having transitioned from being a physical retailer with digital aspirations to being a proven, digital first, multichannel retailer.’
He conceded the economic outlook ‘remains uncertain’ and in common with the industry, Dunelm is seeing some supply chain disruption and inflationary pressures from raw materials, freight costs and driver shortages.
Yet he stressed ‘we feel well placed to continue managing these challenges. Trading in the first ten weeks of the new financial year has been encouraging, with growth against strong comparatives and continued market outperformance.’
