Last checked at 3 Nov 2009 07:00
3rd November 2009
INTERIM MANAGEMENT STATEMENT
17 weeks to 31st October 2009
Trading ahead of expectations
Dunelm Group plc, the leading specialist homewares retailer, issues the following Interim Management Statement.
Sales
At the time of announcing its preliminary results on 15th September 2009, the Group reported a strong start to the current financial year, with like-for-like ("LFL") sales growth of 16.1% in the 10 weeks to 12th September 2009.
In the 7 weeks since that update, trading has continued to be very strong. After 17 weeks of the financial year, sales were as follows:
| FY10 | FY09 | |
| Total sales | £154.7m | £123.3m |
| Total sales growth | 25.5% | 3.3% |
| LFL sales growth/(decline) | 15.1% | (4.9%) |
As well as reflecting the strength and relevance of the Group's Simply Value for Money proposition and further market share gains, this performance continues to benefit from a number of external factors. These include reduced competition due to the exit from the homewares market of Woolworths and other smaller retailers, and relatively resilient consumer spending. Furthermore, the year-on-year growth level has been helped by weak comparative figures in the equivalent weeks last year.
The first half of FY10 ends on 2nd January 2010 and conditions for the remaining 9 weeks are expected to continue to be favourable. In the comparable 9 week period last year, LFL sales declined by (9.5%). Moreover, the first half will include eight days' trading from the Group's winter sale, traditionally the busiest trading days of the year; whereas only two days of the winter sale fell in the first half of FY09 - the effect of this is expected to be a benefit to LFL growth equivalent to approximately two percentage points across H1.
As previously advised, the Board is much more cautious in its expectations for LFL growth in H2. The positive calendar effect related to the winter sale will reverse; the year-on-year benefit of competitor withdrawals will pass; and broader economic considerations including the planned increase in VAT, possible public spending cuts and expected higher levels of unemployment could have an adverse effect on general consumer spending. Moreover, comparatives become much more demanding as the Group's LFL performance in the second half of FY09 showed a much stronger trend, with growth of 5.0%.
Gross Margin
For the first 10 weeks of the financial year, gross margin was 180bps ahead of the prior year. This positive trend has continued and following 17 weeks of trading, the year-on-year gross margin improvement stands at 200bps.
Amongst the factors contributing to this strong performance are continued sourcing gains, aided by the significant volume growth the Group has enjoyed in recent months; and improved clearance of discontinued merchandise. The Board anticipates that the current level of year on year gross margin gains will fall away from Christmas onwards.
Operating Costs
Operating costs continue to be tightly controlled. Whilst overall costs have increased as a result of new store openings (and will continue to do so), cost growth in LFL stores has been limited. The Board does not expect any significant new cost pressures in the short term, although various factors may result in cost increases from 2010 onwards including the impact of increasing the Group's warehousing capacity and changes to the rating regime for retail properties.
Store Portfolio
Four new superstores have been opened since the start of the financial year, in Norwich, Londonderry, Broadstairs and, most recently, Bridgend. Further openings are anticipated in St Helens and Cheltenham by the end of the half year.
Beyond that, a total of 6 new leases have been signed, and the Board continues to anticipate that there will be a total of 12 new stores opened in the current financial year.
Four major store refurbishments have been completed so far this financial year and the Group expects to complete at least 4 more during the rest of the financial year.
Financial position
With no major items of capital expenditure incurred so far this financial year other than the investments in the store portfolio described above, the Group's financial position remains healthy. As at 31st October net cash was £31.5m. The average daily net cash position over the financial year to that point was £33.2m.
Commenting on Dunelm's performance, Will Adderley, Chief Executive, said:
"Despite the continuing uncertainty about economic recovery, our sales performance has held up more strongly than was anticipated at the time we last updated the market. We believe that we are growing substantially more quickly than the market, reflecting the appeal of our Simply Value For Money proposition. As a result the Board now has additional confidence that the Group is well positioned to achieve a sales and profit outturn for the first half of the financial year comfortably ahead of our previous expectations.
"We remain much more cautious about the second half of the year, given the impact both of external economic factors and our far more challenging comparatives. Nevertheless we now expect that the strength of performance in the first half will allow us to achieve a full year result ahead of our previous expectations."
The next update to shareholders will be issued on 5th January 2010 in respect of the 26 weeks to 2nd January 2010.
For further information please contact:
| Dunelm Group plc | 0116 2644 356 |
| Will Adderley, Chief Executive | |
| David Stead, Finance Director | |
| Hogarth Partnership | 020 7357 9477 |
| John Olsen / Fiona Noblet |
Notes to Editors
Dunelm is the UK's leading specialist out of town homewares retailer, operating in the £12bn homewares market. The Group currently operates 98 stores, branded Dunelm Mill, of which 86 are out-of-town superstores and 12 are high street shops. The majority of the stores are located in the Midlands or north-west of England. Dunelm employs over 5,000 full and part time staff, the vast majority of whom work in the stores.
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 in the Midlands specialising in soft furnishings. The first Dunelm superstore was opened in 1991, leading to the Group's expansion into the broader homewares market.
The superstores provide an average of 28,000 sq ft of selling space and offer an extensive range of around 20,000 products across a broad spectrum of categories, including bedding, curtains, gifts and seasonal items, cushions, bathroom products, kitchenware, quilts, pillows and rugs. Dunelm also specialises in offering a wide range of fabrics, made to measure curtains and a frequently changing series of special buys. The directors are passionate about ensuring that all ranges live up to Dunelm's philosophy of offering customers "Simply Value for Money".
Dunelm also operates an on-line store, to be found at www.dunelm-mill.com.
Dunelm listed on the London Stock Exchange in October 2006 (DNLM.L) and has a current market capitalisation of approximately £650 million.