- Full-year profit guided to be ahead of expectations
- Sales up 18% in second quarter
- Warning of second half pressure on margins
Homewares retailer Dunelm (DNLM) continued to deliver the goods on Thursday as it guided for profit in the current financial year to be above expectations.
And yet after opening flat the shares traded lower, down 1.5% to £10.58. The fall likely reflects some profit taking after a recent strong recovery in the share price as well as hinting at the fact this wasn’t an entirely unblemished update.
The company reported sales up 18% year-on-year in the second quarter (encompassing the festive period) to £478 million, an increase of 48% on pre-pandemic levels, with customers seeking to mitigate higher energy bills by snapping up its ‘Winter Warm’ range of bedding, blankets, rugs and throws as well as products like heated indoor airers.
Online and in-store sales were both ahead, digital sales making up 35% of the total, up two percentage points on the same period a year ago.
MARGIN PRESSURE FLAGGED
However, less positively the company expects its gross margins to weaken in the second half thanks to planned sales events. Guidance for full-year margins of 50% remains in place and the company expects pre-tax profit to be above the current consensus range of £131-£186 million.
AJ Bell investment director Russ Mould commented: ‘A beefed-up online operation and a quality, inexpensive range of goods have helped drive a remarkable renaissance at Dunelm in recent years.
‘Since current CEO Nick Wilkinson took the helm nearly five years ago the shares have advanced more than 60% compared with a 3.5% increase for the FTSE All-Share over the same timeframe - all this despite considerable intervening volatility in the wider retail sector.’
Numis said: ‘While the shares have been strong of late, a jump to double-digit revenue growth reassures on the medium-term growth story.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Tom Sieber) and the editor of the article (James Crux) own shares in AJ Bell.
