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3 Nov 2009 07:00
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3rdΒ NovemberΒ 2009
INTERIM MANAGEMENT STATEMENT
17Β weeks toΒ 31stΒ OctoberΒ 2009
Trading ahead of expectations
Dunelm Group plc, the leading specialist homewares retailer, issuesΒ the followingΒ Interim Management Statement.Β
Sales
At the time of announcingΒ its preliminary results on 15thΒ September 2009, the Group reported a strong start toΒ the currentΒ financial year, with like-for-like ("LFL") sales growth of 16.1% in theΒ 10Β weeks toΒ 12thΒ September 2009.Β
In theΒ 7Β weeks sinceΒ thatΒ update, trading has continued to be veryΒ strong. AfterΒ 17Β weeks of the financial year, sales were as follows:
|
FY10 |
FY09 |
|
|
Total sales |
Β£154.7m |
Β£123.3m |
|
Total sales growth |
25.5% |
3.3% |
|
LFL sales growth/(decline) |
15.1% |
(4.9%) |
As well as reflectingΒ the strength and relevance of the Group's Simply Value for Money proposition andΒ further market share gains, this performanceΒ continues to benefitΒ from aΒ number ofΒ external factors. These includeΒ reduced competition due to the exit from the homewares market of Woolworths and other smaller retailers, and relatively resilient consumer spending. Furthermore, theΒ year-on-year growth levelΒ has been helped byΒ weak comparative figures in the equivalent weeks last year.
The first halfΒ of FY10Β ends on 2ndΒ January 2010Β and conditions for the remaining 9 weeksΒ are expected toΒ continue to beΒ favourable. In the comparableΒ 9Β weekΒ period last year, LFL sales declined by (9.5%). Moreover, the first half will include eight days'Β trading from the Group's winter sale, traditionally the busiest trading days of the year;Β whereasΒ only two days of the winter sale fell inΒ theΒ first half of FY09Β - the effect of this is expected to be a benefit to LFL growth equivalent to approximately two percentage points across H1.
As previously advised, theΒ Board is much more cautious in its expectationsΒ forΒ LFL growthΒ inΒ H2.Β The positive calendar effectΒ related to the winter saleΒ will reverse;Β theΒ year-on-yearΒ benefit of competitor withdrawals willΒ pass; and broader economic considerations including the planned increase in VAT, possible public spending cuts andΒ expectedΒ higherΒ levels of unemploymentΒ could have an adverse effect on general consumer spending. Moreover,Β 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%.Β
Gross Margin
ForΒ the firstΒ 10Β weeks of the financial year, gross margin was 180bps ahead ofΒ the prior year. ThisΒ positiveΒ trend has continued and followingΒ 17Β weeks of trading, the year-on-year gross margin improvement stands atΒ 200bps.Β
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; andΒ improved clearance of discontinued merchandise. The Board anticipates thatΒ the current level ofΒ year on yearΒ 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 openingsΒ (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 mayΒ result in cost increasesΒ from 2010 onwards including the impact ofΒ increasingΒ the Group's warehousingΒ capacityΒ and changes to the rating regime for retail properties.
Store Portfolio
Four new superstoresΒ have been opened since the start of the financial year, inΒ Norwich,Β Londonderry, Broadstairs and, most recently,Β Bridgend. Further openings are anticipated in St Helens andΒ CheltenhamΒ by the end of the half year.
Beyond that, a total ofΒ 6Β new leases have been signed,Β and the Board continues to anticipate that there will be a total of 12 new stores opened in the current financial year.Β
Four major store refurbishments have been completed so far this financial yearΒ and the Group expects to complete at least 4 moreΒ during the rest of the financial year.Β
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 31stΒ OctoberΒ net cash wasΒ Β£31.5m.Β The average daily net cash position over the financial year to that point wasΒ Β£33.2m.
Commenting on Dunelm's performance,Β Will Adderley, Chief Executive, said:
"Despite the continuing uncertainty about economic recovery, our sales performance has held upΒ 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 additionalΒ 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 remainΒ much moreΒ cautious about the second half of the year, given the impact both of external economic factors andΒ our far more challengingΒ comparatives. Nevertheless we now expect that the strength of performance in the first half will allow us to achieve a full year result ahead ofΒ our previousΒ expectations."Β
Β
The next update toΒ shareholders will be issued on 5thΒ January 2010Β in respect of the 26 weeks to 2ndΒ January 2010.
For further information please contact:
|
Dunelm Group plc |
0116 2644 356 |
|
Will Adderley, Chief Executive |
|
|
David Stead, Finance Director |
|
|
Hogarth PartnershipΒ |
020 7357 9477 |
|
John Olsen / Fiona NobletΒ |
Notes to EditorsΒ
Dunelm is the UK's leading specialist out of town homewares retailer, operatingΒ in the Β£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 ofΒ 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 theΒ MidlandsΒ 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 theΒ LondonΒ Stock Exchange in October 2006 (DNLM.L) and has a current market capitalisation of approximately Β£650 million.
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