Dunelm shares rally on upbeat update

Shareholders of Dunelm Group plc (LON: DNLM) have seen their shares rally after the firm gave an upbeat update on Thursday morning.

Dunelm Limited is a British home furnishings retailer with one hundred and sixty nine superstores, three high street stores and over one hundred in-store Pausa coffee shops, throughout the United Kingdom.

Shares of Dunelm rallied 18.99% on the announcement and trade at 990p. 5/12/19 11:06BST.

The FTSE250 listed firm saw its shares in red at the start of October, as the firm saw revenue gains of 6% but did not meet the estimated 11% rise.

Dunelm n Thursday confirmed the “successful” transition of all of its customers to a new digital platform and said it now expects annual profit to beat its previous forecasts.

The firm added 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.

Meanwhile, operational costs remain well controlled and in line with the company’s expectations, it said.

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 today’s trading update.

“A lot can happen in two months in the world of retail and in Dunelm’s case the winds have changed in its favour,” AJ Bell investment director Russ Mould said.

He said customers’ warm response to Dunelm’s new website was crucial to today’s update.

“That’s going to be a huge relief to the company as there is always a fear that new IT projects won’t work properly on initial deployment,” Mould said.

Peel Hunt added: “The website is what we can only describe as lightning quick, with better search functionality, an improved customer experience, click and collect capability and provides the basis for significant future development and innovation.”

“Also in its favour is an improvement in margin, which has to be commended given how the general direction of travel for retailers is margin compression in a world of heavy discounting,” Mould also said.

However, uncertainty over the General Election has tempered Dunelm’s predictions, he added.

“No-one knows how the general election result will impact consumer spending patterns and so the company has understandably avoided giving too bullish a comment about its outlook.”

The news will come at a good time for Dunelm, and the firm was set to give shareholders a positive update following the crisis in October.

Competitor DFS Furniture (LON: DFS) updated shareholders recently by not changing their profit outlook desire Brexit uncertainties, and the firm saw a 22% growth in online sales.

Back in October, there was a worry that Dunelm would enter a slump similar to the ones that high street competitors such as Mothercare faced.

The firm seems to have turns fortunes around and now shareholders will be pleased that some relief has been provided in tough market conditions.

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