Last checked at 11 Jan 2011 07:00
11th January 2011
TRADING UPDATE
26 weeks to 1st January 2011
Dunelm Group plc ("Dunelm" or "the Group"), the UK's leading specialist homewares retailer, issues the following trading update in respect of the 26 week period to 1st January 2011.
Revenue & Store Portfolio
Group revenue for the period was:
FY11 (H1) | FY10 (H1) | |
Total sales | £275.7m | £254.2m |
Total sales growth | 8.5% | 26.0% |
Contribution from new space | 9.7% | 10.6% |
LFL sales(decline)/growth2 | (1.2%) | 15.4% |
Total sales for the half grew by 8.5% as the Group continues to grow and improve the quality of its store portfolio through opening new superstores, refitting existing superstores to incorporate the latest customer offer and relocating existing under-sized stores.
Like for like revenue growth of 2.1% in the first quarter was offset by a decline of 4.2% in the second, leading to a small decline over the half year. This profile reflected continuing very strong comparative performance across the half as well as a more difficult current trading environment, particularly in the weeks immediately preceding Christmas.
Superstores were opened in seven new locations during the half year, including the relocation of an under-sized superstore in Hereford. The total number of superstores trading at the period end was 100, compared with the Group's stated medium term target of 150 - 200 superstores across the UK.
Three major store refits were completed in the first half. Sales uplifts remain encouraging when measured against comparable non-refitted stores and are expected to generate an attractive return on the investment of approximately £0.7m per store. The programme of refits will continue and at least four stores are expected to have a major refit in the second half.
Gross Margin
Gross margin for the period is estimated to have improved by 110 basis points compared with the same period in the prior year, with similar levels of increase being achieved in each quarter. Active management of gross margin enabled the Group to offset cost increases in the supply chain whilst still delivering strong value for customers.
Operating Costs
Operating costs remain under close control, with costs in LFL stores showing minimal growth. Overall cost growth reflects new store openings, investments in capability development, and the exit costs relating to the relocation of the Hereford store.
Outlook
The Board remains confident in the Group's prospects for long-term growth.
In the short term we remain cautious about the UK consumer environment and therefore in our expectations for second half trading. While the impact of general economic factors on consumer demand is uncertain, the increase in VAT will place further pressure on ex-VAT revenues and the recent rise in cotton prices is expected to feed through to increased cost of goods by the middle of the calendar year.
The Board does not anticipate any significant new LFL operating cost pressures in the short term, although the continuing development of the Group is likely to result in further non-store cost increases as a number of central functions continue to be strengthened.
The pipeline of new store openings continues to be encouraging with eight committed opportunities, including one opening previously scheduled in the first half, expected to open as follows:
- four new leasehold superstores scheduled to open in the second half
- two new leasehold superstores scheduled to open in FY12
- two existing under-sized stores to be relocated to newly acquired freehold sites in FY12
Financial Position
As at 1st January 2011 net cleared funds at bank amounted to £28.8m. The average daily net cash position over the half year was £29.1m.
Commenting on Dunelm's performance, Will Adderley, Chief Executive, said:
"We have continued to develop our business successfully during the half and we were delighted to celebrate the opening of our 100th superstore at the beginning of December. The business is in good health operationally and we remain in a very strong financial position.
"However, trading conditions have been tough in our most recent quarter, especially in our peak trading weeks in late November and early December and this has had an impact, albeit limited, on both revenues and earnings.
"Looking ahead we are facing a number of external factors in our market which could affect both consumer demand and bought-in costs for a period of time. However, we are very confident that we can use our strong financial position and entrepreneurial flexibility to trade our way through this period and build an even stronger business for the long term. We will continue to expand through our strong pipeline of new stores, refits and further investments in support of our strategy.
"Nick Wharton joined the business on a full-time basis in December and as previously announced he will formally take over the role of Chief Executive from 17th February when I will become Executive Deputy Chairman."
For further information please contact:
Dunelm Group plc | 0116 2644 356 |
Will Adderley, Chief Executive Nick Wharton, Chief Executive Designate | |
David Stead, Finance Director | |
MHP | 020 3128 8772 |
John Olsen / Simon Hockridge |
Forthcoming Newsflow.
Dunelm will release its interim results on 17th February 2011. There will be a presentation for analysts at 9.30am at the offices of UBS, 1 Finsbury Avenue, London EC2M 2PP. Those analysts who wish to attend are requested to contact Natasha Jobling of MHP on the above number. A copy of the presentation will be made available on the Dunelm website.
Notes
1. Except for the trading activities described above, there has been no significant change to the financial condition of the Group.
2. Like-for-like sales represent revenues from stores trading for at least one full financial year prior to 4th July 2010.
3. Quarterly sales analysis:
FY11 | FY10 | ||||||
Q1 | Q2 | H1 | Q1 | Q2 | H1 | ||
Total sales | £126.7m | £149.0m | £275.7m | £113.6m | £140.6m | £254.2m | |
Total sales growth | +11.6% | +5.9% | +8.5% | +25.5% | +26.4% | +26.0% | |
Contribution from new space | +9.5% | +10.1% | +9.7% | +10.1% | +11.0% | +10.6% | |
LFL sales growth/(decline) | +2.1% | -4.2% | -1.2% | +15.4% | +15.4% | +15.4% | |
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 110 stores, branded Dunelm Mill, of which 100 are out-of-town superstores and 10 are located on high streets, and an on-line store, to be found at www.dunelm-mill.com.
Dunelm's "Simply Value for Money" customer proposition offers industry-leading choice of quality products at keen prices, with high levels of availability and supported by friendly service. Core ranges include many exclusive designs and premium brands such as Dorma, and are supported by a frequently changing series of special buys. The superstore format provides an average of 30,000 sq ft of selling space with over 20,000 products across a broad spectrum of categories, extending from the Group's home textiles heritage (bedding, curtains, cushions, quilts and pillows) to a complete homewares offer including kitchenware and dining, lighting, wall art, furniture 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.
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 into broader homewares categories following the opening of the first Dunelm superstore in 1991.
Dunelm employs over 6,000 full and part time staff, the vast majority of whom work in the stores and was listed on the London Stock Exchange in October 2006 (DNLM.L). The Group has a current market capitalisation of approximately £1.0 billion.