Trading Statement

RNS Number : 9515T

Dunelm Group plc

12 January 2017

 

12^th January 2017

Dunelm Group plc

Second Quarter Trading Update

Dunelm Group plc ("Dunelm" or "the Group"), the UK's leading homewares retailer, reports the following trading update for the second quarter of its current financial year, comprising the 13 week period ended 31^st December 2016.

Revenue

Total revenue for the second quarter rose by 6.6% to £261.9m. Total revenue, excluding the acquisition of Worldstores, for the second quarter rose by 3.3% to £253.8m. Total like-for-like (LFL) growth (combining LFL stores and Home Delivery) increased by 0.2%. Due to the change in the accounting period end date, the figures include six days of the Winter Sale, compared to eight days in the comparative period last year. Without this impact LFL growth would have been approximately £4.0m higher (equivalent to 1.7% in the quarter and 0.9% over the half year). We expect this to reverse in the second half of the year.

As expected, we saw an improved second quarter with seasonal product in particular performing well. The homewares market has continued to decline but we believe that we are continuing to outperform the market as a whole.

We also continue to see good growth in the online business, including a 21.7% increase in home delivery sales for the quarter.

	13 weeks to 31st December 2016			26 weeks to 31st December 2016
	Sales (£m)	YoY Growth (£m)	YoY Growth (%)	Sales (£m)	YoY Growth (£m)	YoY Growth (%)
LFL stores	215.6	-3.0	-1.4 %	389.4	-12.5	-3.1%
Home Delivery	20.1	+3.5	+21.7%	33.7	+5.6	+20.1%
Total LFL	235.7	+0.5	+0.2%	423.1	-6.9	-1.6%
Non-LFL stores	18.1	+7.5	+70.6%	29.3	+11.2	+61.4%
Total Dunelm excl. Worldstores	253.8	+8.0	+3.3%	452.4	+4.3	+1.0%
Worldstores*	8.1	+8.1	-	8.1	+8.1	-
Total Dunelm Group	261.9	+16.1	+6.6%	460.5	+12.4	+2.8%

*Worldstores figures represent the five week period post acquisition on 28th November 2016, until 31st December 2016

Gross Margin

Gross margin percentage for the half year is estimated to be broadly flat compared with the first half of last financial year.  In the quarter, we started to see some impact from adverse currency conditions, affecting goods sourced directly or from third parties, and expect this to increase as we move into the second half of the year. Overall, we expect gross margin to remain broadly flat in the second half, compared to the same period last year.

Store Portfolio

We opened five new stores in the period leaving our superstore footprint at 157 stores. We are now legally committed to a further seven new stores of which five are due to open in the current financial year. We have completed three store refits within the year to date and have at least a further nine planned for the remainder of the financial year.

Business Investment

We are continuing to develop our strategic plans and invest in our business, particularly in systems, capability and marketing.

We have been improving our supply chain with the opening of a new warehouse and the consolidation of our suppliers. These initiatives have caused some disruption to in-store availability during the quarter and we have incurred £3m of additional transitional costs as part of that process. However, availability has already improved to near normal levels and we should see significantly less transitional costs in the second half of the year.

Worldstores

The development of our online business is a key strategic objective and we firmly believe our acquisition of Worldstores, which completed on 28^th  November, is an opportunity to accelerate the growth of our internet operation, more than doubling its size, and enhancing our position as the destination homewares retailer in the UK, both online and offline.

Since the acquisition, the business has generated £8.1m of revenue. We have invested around £6.2m in working capital and paid £1m of the purchase consideration. The additional £7.5m consideration is due at the end of January 2017. The business is performing in line with our expectations and we will give a further update in our interim report.

Financial Position

As at 31st December 2016, net debt was approximately £103m. Daily average net debt across the half year amounted to £77.6m. The movement in net debt reflects the investment in Worldstores, higher capital expenditure on new stores and refits, as well as the acquisition of two freehold properties.

Commenting on Dunelm's performance, John Browett, Chief Executive, said:

"Following a difficult first quarter we have seen an improvement in performance both in our stores and online. It was encouraging to see customers respond well to our seasonal product lines, especially our new Christmas offer. We have continued to outperform the homewares market in what is a challenging and volatile retail environment.

"We were pleased to complete the acquisition of Worldstores in the quarter and remain excited by the opportunity it gives us to accelerate the growth of our online proposition.

"We continue to focus on and invest in our key strategic initiatives, which will improve the business over the medium term, whilst ensuring we maintain our unique offer of tremendous value for money, combined with an unrivalled range and great service."

Ends

For further information please contact:

Dunelm Group plc	0116 2644439
John Browett, Chief Executive
Keith Down, Chief Financial Officer
MHP Communications	020 3128 8100
John Olsen/Simon Hockridge/Gina Bell	[e-mail]

Forthcoming Newsflow:

Dunelm's half year results announcement will be on 8th February 2017. The Q3 trading update will be on 7^th April.

Notes

1.     Like-for-like (LFL) sales represents revenues from stores trading for at least one full financial year prior to 2^nd July 2016 and excludes stores with significant change of space in the current or previous financial year.

2.     Quarterly sales and margin analysis (excluding Worldstores):

	13 weeks to 31st December 2016
	Q1	Q2	H1	Q3	Q4	H2	FY
Total sales	£198.7m	£253.8m	£452.4m
Total sales growth	-1.8%	3.3%	1.0%
LFL sales growth	-3.8%	0.2%	-1.6%
Gross margin growth*	0bps	+10bps	+5bps

                    *estimated

	13 weeks to 2nd January 2016
	Q1	Q2	H1	Q3	Q4	H2	FY
Total sales	£202.3m	£245.7m	£448.1m	£229.0m	£203.8m	£432.8m	£880.9m
Total sales growth	12.0%	8.8%	10.3%	5.9%	1.8%	3.9%	7.1%
LFL sales growth	5.5%	3.9%	4.6%	1.1%	-0.6%	0.3%	2.5%
Gross margin growth/decline	+20bps	+30bps	+30bps	+90bps	+80bps	+90bps	+60bps

Notes to Editors

Dunelm is market leader in the £11bn UK homewares market. It currently operates 161 stores, of which 157 are out-of-town superstores and 4 are located on high streets, and an online store, to be found at www.dunelm.com.

The company acquired the assets of Worldstores, including Achica and Kiddicare, on the 28^th November 2016. Worldstores is one of the UK's largest online retailers of products for the home and garden, with over 500,000 products on the site. Achica is a members-only online store offering furniture, homewares and accessories, often at significant discounts to RRPs for limited periods through flash sales. Kiddicare is a multichannel retailer, selling nursery supplies and merchandise for children and young families.

Dunelm's "Simply Value for Money" customer proposition offers industry-leading choice of quality products at keen prices, with high levels of availability and supported by friendly service. Core ranges include many exclusive designs and premium brands such as Dorma and Fogarty, and are supported by a frequently changing series of special buys. The superstore format provides an average of 30,000 sq. ft. of selling space with over 20,000 products across a broad spectrum of categories, extending from the Group's home textiles heritage (bedding, curtains, cushions, quilts and pillows) to a complete homewares offer including kitchenware and dining, lighting, wall art, furniture and rugs. Dunelm is one of the few national retailers to offer an authoritative selection of curtain fabrics on the roll, and owns a specialist UK facility dedicated to producing made-to-measure curtains.

Dunelm was founded in 1979 as a market stall business, selling ready-made curtains. The first shop was opened in Leicester in 1984 and over the following years the business developed into a successful chain of high street shops before expanding into broader homewares categories following the opening of the first Dunelm superstore in 1991.

Dunelm has been listed on the London Stock Exchange since October 2006 (DNLM.L) and has a current market capitalisation of approximately £1.6bn.

 

END

 

 

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