Dunelm shares spike 8% following strong interim update

Dunelm (LON:DNLM) shares have spiked on Wednesday morning, following a strong set of interim results published by the British firm.

The homeware and furniture retailer said that they had seen a strong six month period of trading, which led to the delivery of strong results today.

Dunelm mentioned that in the six month period which ended December 28, pretax profit totaled £83.6 million seeing a 19% climb from the £70 million figure just one year ago.

Revenue additionally grew by 6% on an year on year basis, to £585 million from £555.8 million, and like for like revenue also grew 5.6%.

Sales surged for Dunelm, like for like sales from stores rose by 2% and online sales carried momentum driving results as these saw a 33% gain.

The FTSE 250 listed firm lifted its interim dividend to 8 pence per share, which represents an increase of 6.7% from the 7.5 pence figure last year.

Dunelm forecasted by saying that they expect annual pretax profit to beat market and analyst expectations, and should be within the £135 million to £137.3 million ball park.

Nick Wilkinson, Chief Executive Officer, commented:

“We have made good progress over the first half, following a strong performance last year, which is reflected in the significant growth delivered in both sales and profits.

“We continue to build strong foundations for future growth. The successful launch of our digital platform accelerates our ability to innovate our customer proposition and we remain focused on operational improvements across all areas of the business.

“We also continue to broaden our customer base and following the successful sponsorship of ITV’s This Morning, which concludes in March, we are excited about our new sponsorship deal with Channel 4’s First Dates programme, starting later this week, which will enable us to reach more customers with the Dunelm brand.

“The third quarter has started well, with a successful Winter Sale across the total retail system. As a result, we expect full year FY20 profit before tax to be slightly ahead of the top of the latest range of analyst expectations7. We are monitoring the Coronavirus outbreak carefully. To date we have not assumed any material disruption to our supply chain or any financial impact in the year.

“We have plenty to look forward to over the remainder of the year as we strengthen the Dunelm offer and help more customers to create the home they love.”

Analysts were quick to praise Dunelm and their recent performance. John Woolfitt, Director of Trading at Atlantic Capital Markets commented: “Overall Dunelms figures read very well, the online presence is certainly starting to feed into the headline numbers. The strong increase in profit translates into a positive jump on the eps and they have also trimmed net debt. Despite retail being a struggling sector, Dunelm have bucked the trend and backed up their last trading statement which was also positive with yet another bullish report. Investors will no doubt be happy with this positivity translating to an increase in the dividends.”

Confident expectations pay off for Dunelm

In January, the firm gave shareholders confident expectations in their thirteen week update.

Dunelm said that like for like sales in a thirteen week period to December 28 surged 5%, whilst 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.

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

Dunelm’s strong few months

In December additionally, Dunelm saw their shares in green. The FTSE 250 lister 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.

Dunelm have managed to pull a rabbit out of the hat with this update, and have seemingly beat the theory that the British High Street is facing trouble.

Shareholders will remain optimistic on this update and will hope that strong trading can continue throughout 2020.

Dunelm shares trade at 1,308p (+8.91%). 12/2/20 10:06BST.

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