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10 Jul 2019 07:00
10 July 2019
Dunelm Group plc
Fourth Quarter Trading Update
Dunelm Group plc ("Dunelm" or "the Group"), the UK's leading homewares retailer, reports the following trading update for the 13-week period ended 29 June 2019.
Revenue
Total like-for-like (LFL) revenue for the fourth quarter increased by 15.4%, reflecting strong underlying growth in stores and online, the benefit of a weak comparator period last year and favourable weather this year.
- Q4 LFL store revenue increased by 12.1%
- Q4 LFL online revenue on Dunelm.com continued to grow strongly in the quarter, up 37.0%
| 13 weeks to 29 June 2019 | 52 weeks to 29 June 2019 | ||||
| Revenue (£m) | YoY Growth (£m) | YoY Growth (%) | Revenue (£m) | YoY Growth (£m) | YoY Growth (%) |
LFL Stores1 | 205.5 | +22.2 | +12.1% | 883.8 | +62.9 | +7.7% |
LFL Online - Dunelm.com2 | 39.0 | +10.5 | +37.0% | 140.2 | +36.4 | +35.1% |
Total LFL | 244.5 | +32.7 | +15.4% | 1,024.0 | +99.3 | +10.7% |
Non-LFL Stores3 | 19.6 | +4.9 | - | 72.9 | +13.4 | - |
Total Dunelm | 264.1 | +37.6 | +16.6% | 1,096.9 | +112.7 | +11.5% |
Non-LFL Online - Worldstores4 | - | -10.0 | - | 3.5 | -62.4 | - |
Total Group | 264.1 | +27.6 | +11.6% | 1,100.4 | +50.3 | +4.8% |
Comment from Nick Wilkinson, Dunelm's Chief Executive Officer:
"In the year that Dunelm turned 40, we are delighted that both new and existing customers continue to respond positively to our evolving offer. The strong growth in the final quarter, and the year as a whole, demonstrates that in a rapidly changing marketplace, the broad appeal of Dunelm's purpose 'to help everyone create a home they love' is resonating well.
"We continue to invest in the business, particularly in strengthening our digital capabilities and reaching more customers through our brand marketing initiatives.
"Looking forward, as the UK's leading homewares specialist, we see significant opportunity for continued growth both from our stores and online, whilst maintaining our improved operational discipline. In the short-term, we remain cautious about the uncertain political climate and the impact it may have on consumer spending, but expect to make further progress in the year ahead and are confident about the Group's longer-term prospects."
1. LFL Stores - stores trading for at least one full financial year prior to 1 July 2018 without any significant change of space. LFL stores revenues include Reserve & Collect sales, and home delivery sales in respect of orders placed via in-store tablets
2. LFL Online - Dunelm.com (excludes Reserve & Collect sales, and home delivery sales in respect of orders placed via in-store tablets)
3. Non-LFL Stores – new stores (including relocations) opened in the current or previous financial year, and existing stores with significant change of space in the current or previous financial year
4. Non-LFL Online – Worldstores.co.uk, Kiddicare.com and Achica.com (these websites are now closed)
Gross Margin
In the fourth quarter, gross margin increased by approximately 240bps at Group level. Core Dunelm margin improved by 200bps in the quarter, driven by better sourcing and a lower level of end of season clearance compared to the same period last year. Sales from the Worldstores businesses were a smaller proportion of total revenues in Q4 FY18, and therefore the positive margin impact of closing these dilutive websites was reduced to 40bps in the quarter.
For the full year, we expect total Group margin to have improved by approximately 160bps, with core Dunelm margin improving by around 100bps.
Overall Financial Performance
We expect full year profit before tax to be towards the upper end of the range of £124m - £126m announced in the trading update on 20th June 2019 (FY18 underlying PBT: £102m).
The group continues to be highly cash generative. As at 29 June 2019, net debt was £25.3m (FY18: £124.0m) and weekly average net debt during the second half of the year was £20.6m. Net debt was lower than expected due to higher operating profits, positive working capital management and the timing of capital investment at year end.
Business development
We are continuing to progress the phased roll-out of our new digital platform. We will fully transfer onto the new platform during FY20, proceeding carefully through the beta phases in order not to disrupt the strong growth on the existing website.
During the quarter, we continued to invest in raising brand awareness. A re-run of the ad-funded Back to Mine programme on ITV1 in April and additional marketing spend in May gave us a strong run in to our Summer Sale campaign. Our sponsorship of This Morning continued throughout the period.
There were two new store openings towards the end of the quarter (including one relocation), increasing our store footprint to 170 superstores. We expect to open two new stores (including one relocation) in the first half of FY20.
FY20 accounting and tax update
We will implement IFRS 16 'Leases' for the financial year ending 27 June 2020 (FY20). We anticipate that this new standard will result in a reduction of profit before tax of approximately £3m, with no cash impact. EBITDA is expected to increase by c. £50m. We will provide detailed guidance on the impact of the new standard in the preliminary results in September.
Additionally, once the new digital platform is fully launched, we will expense the majority of digital development costs in the P&L (previously capitalised as we went through the build phase). This change reflects that once the platform is fully operational, the digital development team will be constantly improving the customer experience and therefore it will be more difficult to attribute these costs to separately identifiable future economic benefits. We estimate this additional cost in the P&L will be approximately £5-7m in FY20; this is in line with our previous expectations. We note that the total cash spend (capex and P&L opex) for Technology will remain broadly in line with FY19.
Due to changes in tax legislation, there will be a one-off adverse cash tax payment in FY20 relating to the acceleration in the timing of corporation tax payments on account. This change will result in the Company paying the equivalent of 18 months of corporation tax in FY20. There will be no P&L impact.
Ends
For further information please contact:
Dunelm Group plc | 0116 264 4439 |
Nick Wilkinson, Chief Executive Officer Laura Carr, Chief Financial Officer
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MHP Communications | 020 3128 8789 |
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Simon Hockridge / Tim Rowntree / Pete Lambie | dunelm@mhpc.com |
Next scheduled events:
Dunelm will make its preliminary results announcement on 4th September 2019 and there will be a presentation for analysts in the offices of UBS, 5 Broadgate, London EC2M 2QS. Those analysts who wish to attend are requested to contact Ailsa Prestige of MHP on 020 3128 8734 or ailsa.prestige@mhpc.com. A copy of the presentation will be made available on the Dunelm website.
Notes
1. Quarterly sales and margin analysis (totals include Worldstores):
| 52 weeks to 29 June 2019 | ||||||
| Q1 | Q2 | H1 | Q3 | Q4 | H2 | FY |
Total sales | £248.2m | £303.6m | £551.8m | £284.5m | £264.1m | £548.6m | £1,100.4m |
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LFL Stores growth | 1.3% | 5.7% | 3.8% | 9.8% | 12.1% | 10.9% | 7.7% |
LFL Online growth | 33.3% | 37.9% | 35.8% | 32.1% | 37.0% | 34.6% | 35.1% |
Total LFL growth | 4.2% | 9.0% | 6.9% | 12.5% | 15.4% | 13.9% | 10.7% |
Total Dunelm growth** | 7.5% | 9.6% | 8.7% | 12.4% | 16.6% | 14.4% | 11.5% |
Total Group growth | 0.1% | 2.0% | 1.2% | 6.1% | 11.6% | 8.7% | 4.8% |
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Gross margin growth* | +130bps | +190bps | +165bps | +90bps | +240bps | +160bps | +160bps |
| 52 weeks to 30 June 2018 | ||||||
| Q1 | Q2 | H1 | Q3 | Q4 | H2 | FY |
Total sales | £247.9m | £297.5m | £545.4m | £268.2m | £236.5m | £504.7m | £1,050.1m |
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LFL Stores growth | 6.5% | 1.1% | 3.5% | 1.2% | -4.6% | -1.6% | 1.0% |
LFL Online growth | 46.2% | 30.5% | 36.8% | 35.7% | 41.8% | 38.7% | 37.9% |
Total LFL growth | 9.3% | 3.4% | 6.0% | 4.6% | 0.1% | 2.4% | 4.2% |
Total Dunelm growth | 14.3% | 9.4% | 11.4% | 9.0% | 3.7% | 6.4% | 8.9% |
Total Group growth | 24.8% | 13.6% | 18.4% | 5.1% | -1.4% | 1.9% | 9.9% |
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Gross margin growth | -220bps | -155bps | -180bps | -15bps | -50bps | -20bps | -90bps |
* Estimated Group margin growth
** Total Dunelm growth in Q1 has been restated to 7.5% (from 5.8% as previously reported) due to a sales reclassification between non-LFL stores and non-LFL online categories
Notes to Editors
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, following the opening of the first Dunelm superstore in 1991, into broader homewares categories. Dunelm is now a multi-channel retailer, with Dunelm.com being launched in 2005 and the acquisition of the Worldstores Group in 2016 accelerating this further.
Dunelm is market leader in the £13bn UK homewares market and active in the £11bn UK furniture market. It currently operates 172 stores, of which 170 are out-of-town superstores and two are located on high streets, and also trades online through Dunelm.com. Dunelm employs approximately 10,000 colleagues and sells around 30,000 product lines in store, increasing to around 60,000 online.
Dunelm, "The Home of Homes", offers a customer proposition of style, value, quality and ease of shopping. From its textiles heritage, in areas such as bedding, curtains, cushions, quilts and pillows, Dunelm has broadened its product range to a complete homewares offer including the likes of kitchenware, dining, lighting, seasonal, wall art 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 and blinds.
The product range includes many exclusive, own brand designs and owned premium brands such as Dorma and Fogarty. This is augmented by a range of other well-known brands and license agreements.
Dunelm has been listed on the London Stock Exchange since October 2006 (DNLM.L) and has a current market capitalisation of approximately £1.8bn.
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