Following today’s release of Dunelm’s figures for Q1 FY2021/22; Matt Walton, senior data analyst at GlobalData, a leading data and analytics company, offers his view: “Homewares market leader Dunelm has produced a strong quarter of growth despite going up against an exceptional comparative, caused by the release of pent-up demand after the spring 2020 lockdown, with total sales up £29.7m to £388.8m. Its summer sale being pushed into this quarter supported the uplift (though it did contribute to its gross margin declining by 10bps on last year) along with new furniture ranges gaining traction. Online outperformed, with sales up 20% on last year as shoppers migrated to buying online and the quicker fulfilment of click & collect provides a key advantage over the online pureplays. However, this uplift was not at the expense of stores, which also grew by c.3%.
“The positive response from furniture will be encouraging for Dunelm, given the greater focus it has placed on this category, with it recently opening a new furniture warehouse in Daventry and launching a new upholstery offer. Growth in this area will be aided by shoppers feeling more confident about buying furniture online and its focus on quick delivery lines which provides Dunelm an edge over the specialists. The main challenge it will face will be boosting conversion in this sector, with Q2 2021 figures from GlobalData’s quarterly home survey indicating that conversion within the categories it operates in were around the 50% mark. It also has to overcome the barrier of making room for more space-intensive products instore, with shoppers wanting to test these sofas and mattresses prior to purchase.
“Like all retailers, Dunelm will be impacted by supply chain disruption for the foreseeable future though it believes that it is well placed to overcome these challenges. Its quarter-end inventory levels were higher than the previous two years at £168m and its lower reliance on seasonal products mean it will be less impacted in the run-up to Christmas. The retailer also believes that its wider range will also help insulate it as customers will substitute their first-choice product with something else. This is especially pertinent in textiles where its wide range makes it comfortably the market leader in the first half of 2021. Beyond sales growth, the rest of Dunelm’s financials are also in robust shape with its cash position being £34m up on the same time last year while it still expects its full year profits to be in-line with analyst consensus.”