Last checked at 13 Jul 2010 07:00
13th July 2010
Dunelm Group plc ("Dunelm")
Trading Update
Following the end of its financial year on 3rd July 2010, Dunelm, the leading out-of-town specialist homewares retailer, today makes the following comments on trading.
Sales
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| First half (26 weeks to 2nd January) | Second half (26 weeks to 3rd July) | Full year (52 weeks to 3rd July) |
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| Total sales value | £254.2m | £238.6m | £492.8m |
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| Total sales growth | +26.0% | +10.9% | +18.2% |
| LFL sales growth | +15.4% | +0.8% | +8.0% |
| Contribution from new space | +10.6% | +10.1% | +10.2% |
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| Prior year LFL sales growth | -5.6% | +5.0% | -0.5% |
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As previously anticipated, LFL sales growth slowed in the second half of the financial year and was marginally negative in the final ten weeks, reflecting strong comparatives in the prior year.
The pattern of sales growth was affected by a shift in our accounting calendar so that more of the winter sale fell in the first half than in previous years. Adjusting for this effect, LFL growth would have been approximately two percentage points lower in the first half, and two percentage points higher in the second.
Gross Margin
Gross margin has continued to increase year on year, due primarily in the most recent period to successful management of old stock. Over the financial year as a whole, we expect gross margin to be 46.8%, an increase of 190 basis points.
Operating Profit
We have continued to keep tight control over operating costs. Therefore, we anticipate that the sales and gross margin performance will lead to operating profit for the year a little ahead of current market expectations.
Store Portfolio
With 10 superstore openings achieved in the financial year, the Group now trades from 94 superstores and 10 older format high street stores. We remain confident that the UK can support at least 150-200 Dunelm superstores.
Leases have already been signed for 8 new trading locations due to open in FY11, and we are also committed to relocating an under-sized superstore. The pipeline for further new store locations remains encouraging.
In addition, our refit programme has continued, with 9 major refits completed in the year. On average, each major refit costs approximately £0.7m, and we estimate that the average sales uplift attributable to the refit is around 10%. Further major refits are planned at a rate of at least 10 stores per year.
During the financial year, we took the opportunity to acquire the freehold interest in an existing leasehold store, at a cost of £2.0m. This continues our strategy of holding a mix of freehold and leasehold units, and we will continue to consider freehold acquisitions as a way of accessing new trading locations or to protect existing ones. As at the year-end, the total number of stores held on a freehold basis was 17.
Infrastructure
As previously announced, our distribution centre at Stoke is being extended to support the continuing expansion of our store chain. We are on schedule to commence operations in the enlarged facility in September. The capital cost of fitting out this building is approximately £2.0m and ongoing revenue costs will rise by approximately £0.8m per annum.
We have also indicated previously that our future growth will require increased numbers of head office staff, beyond the capacity of our current premises. We have therefore acquired a plot of land ready for development of a new head office. Building work has recently started and we expect to move in autumn 2011. The total capital cost of the new facility, including land, is estimated at £12.0m.
Financial Position
As at 3rd July 2010 the Group had net cleared funds of £10.6m, together with a committed undrawn revolving loan facility of £40m.
During the year, the Group returned £43m of excess capital to shareholders (21.5p per share), the majority of it at the end of March. Since that date, daily average net cleared funds have been £18.4m.
Future Reporting
In order to provide consistency from one year to the next, we will in future provide updates on trading at quarterly intervals. The next update will be on 6th October 2010, reporting on sales and gross margin trends for the 13 weeks to 2nd October. Comparative data for the last financial year, analysed by quarter, is set out in an appendix to this statement.
Will Adderley, Chief Executive, commented:
"We are pleased with our trading performance over the last financial year. We remain as determined as ever to keep offering 'simply value for money' to more and more customers across the UK. I am particularly proud of the ways in which we have developed our offer over the last twelve months - including reinvigorating our furniture and storage departments, rolling out our arts & crafts section to more stores, piloting an exciting new version of our kitchen department, and launching the Dunelm gift card.
"We do not anticipate that it will be possible to maintain last year's rate of like for like sales growth in the coming twelve months as consumer spending has to absorb tax increases, public sector cuts and, potentially, interest rate rises. We also think it will be hard to achieve further gross margin gains, with uncertainty over sterling and recent increases in freight costs affecting imported products.
"We continue to see opportunities both to improve our offer and to extend our footprint further in the UK. We look forward to another period of strong space growth."
Dunelm will make its preliminary results announcement on 16th September 2010. There will be a presentation for analysts at 9.15am in the offices of UBS, 100 Liverpool Street, London EC2M 2RH. Those analysts who wish to attend are requested to contact Natasha Jobling of Hogarth on 020 7357 9477 or njobling@hogarthpr.co.uk.
ENDS
For further information please contact:
| Dunelm Group plc | 0116 2644 356 |
| Will Adderley, Chief Executive |
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| David Stead, Finance Director |
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| Hogarth Partnership | 020 7357 9477 |
| John Olsen / Simon Hockridge |
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Notes to Editors
Dunelm is ranked third largest retailer in the £12bn UK homewares market (source - Verdict). The Group has 104 stores, branded Dunelm Mill, of which 94 are out-of-town superstores. Dunelm employs over 5,500 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 move into the broader homewares market.
Dunelm superstores provide an average of 28,000 sq ft of selling space and offer an extensive range of approximately 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 has an on-line store (www.dunelm-mill.com) with over 13,000 products available.
Dunelm is listed on the London Stock Exchange (DNLM.L).
Appendix
Quarterly information
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| 13 weeks to 3rd October 2009 | 13 weeks to 2nd January 2010 | 13 weeks to 3rd April 2010 | 13 weeks to 3rd July 2010 |
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| Total sales value | £113.6m | £140.6m | £127.1m | £111.6m |
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| Total sales growth | + 25.5% | +26.4% | +12.8% | +8.8% |
| LFL sales growth | +15.4% | +15.4% | +3.2% | -1.9% |
| Contribution from new space | +10.1% | +11.0% | +9.6% | +10.7% |
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| Gross margin change yoy | +210bps | +190bps | +170bps | +160bps |
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| Adjusted for timing of winter sale: |
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| LFL sales growth |
| +11.6% | +7.2% |
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| Gross margin change yoy |
| +250bps | +100bps |
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