Dunelm continue the good performance and give shareholders confident expectations

Dunelm Group PLC (LON:DNLM) have reported sales and margin growth in the second half of its financial year.

The British homeware firm said that like for like sales in a thirteen week period to December 28 surged 5%, which gives them a strong foot holding where rivals such as DFS (LON:DFS) have seen volatility.

The firm alluded to strong growth across the total retail system, as such total sales growth including new stores was 6.2% higher in the second quarter.

The company also impressively noted that gross margin improve by 110 basis points in the second quarter, mainly due to sourcing gains and lower product markdowns. Margin improvements were made across all product categories, Dunelm said.

Speculating further, Dunelm gave shareholders optimism by saying that it plans to add over 6,000 new online exclusive products in the current financial year.

Dunelm alluded to the successful transition to its new digital platform across the second quarter.

The FTSE 250 constituent expects pretax profit for the first half to total £83 million after adjusting for the impact of the new accounting standard IFRS 16. In the first half of financial 2019, Dunelm’s pretax profit was £70 million.

The company added that the regulation of IFRS 16 reduced pretax profit by £1.3 million in the first half of financial 20.

Pleasing results for Dunelm

Comment from Nick Wilkinson, Dunelm’s Chief Executive Officer:

“We are really pleased with our performance in the first half, building on the strong growth and profitability delivered last year.  The second quarter was particularly strong in terms of sales and margin growth, on both one-year and two-year bases.

“The successful launch of our new digital platform during the quarter marked an exciting milestone for Dunelm.  The transition to a modern, flexible, cloud-native platform has already improved our customer experience and will allow us to step change our retail innovation capabilities going forward. Our customers have responded well to the new website during Christmas and Winter Sale trading.

“Our ambitious growth plans are centred on extending and enhancing our customer proposition, helping more customers than ever create a home that they love.  We are excited by the significant opportunities ahead of us.”

Dunelm gives shareholders satisfaction

The firm has seen a strong period of trading over the last few months as shares rallied at the start of December.

The firm said that gross margins were stronger than expected in the first half of its current financial year as a result of sourcing gains and better sell through.

The FTSE 250-listed homewares retailer said it now has a modern, flexible, cloud-native platform that will be used to accelerate the development of its customer proposition.

“In light of the above, the board now anticipates that the full year profit before tax will be higher than our previous expectations, assuming no significant change in consumer demand as a result of the outcome of the general election,” Dunelm said in December’s trading update.

Dunelm makes ground where rivals remain cautious

Laura Ashley (LON:ALY) who also provide homeware have struggled over the last few months. The homeware and clothing retailer said that, for the 52 weeks to 30 June, statutory loss before tax amounted to £14.3 million.

The primary causes for the year-on-year drop in profit are the underperformance of Home Furnishing and its website after a re-platforming exercise last November.

Total like-for-like retail sales were down 3.5%, whilst total group sales reached £232.5 million, down from the £257.2 million figure recorded for 2018.

Certainly, shareholders of Dunelm can remain optimistic for trading across 2020 as the firm looks set to deliver another successful year.

Shares in Dunelm trade at 1,145p (+0.17%_). 9/1/20 11:37BST.

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