Dunelm defies gloom with strong LFL store sales, says GlobalData

Following today’s release of Dunelm Q2 figures for FY2018/19, Hannah Thomson, senior retail analyst at GlobalData, a leading data and analytics company, comments: ‘‘Speculation that the pre-Christmas trading period was one of the toughest in recent years for many UK retailers doesn’t seem to apply to Dunelm. Group sales for the homewares retailer rose £6m in the 13 weeks to 29 December, despite the closure of the Worldstores, Kiddicare and Achica websites, which it acquired last year. The closure of these businesses impacted online sales, which fell by £10.7m, but total sales of the core Dunelm business still increased by £26.6m to £304.0m. Unusually therefore, growth was driven neither by new store openings, nor by the online business – instead, l-f-l store sales grew 5.7%. The positive results cheered investors and sent Dunelm’s share price up by 12% in early trading.

“For a mature retailer such as Dunelm – it has no plans to increase its 169 store portfolio – these results are especially impressive. A marketing campaign which launched in September promoting its “home of homes” proposition seems to have been effective in winning over new customers, and portraying Dunelm as a “go-to” destination for homewares shoppers, with a wide product range allowing customers to find everything under one roof. Dunelm also has a healthy online business; online penetration is at 16.5% (ahead of the average of 14% for the homewares market), and this will be strengthened with the launch of a new website, which will finally include a click & collect option, in Q4.

“The outlook for the rest of the financial year is therefore even more positive. The closure of the Worldstores business has allowed gross margin to increase by approximately 190bps compared with Q2 last year, and despite wider economic uncertainty and low consumer confidence, Dunelm expects profit before tax for FY 2018/19 to be ahead of analyst expectations.”