Dunelm Regulatory News (DNLM)

13 Jul 2009 07:00



13th July 2009

Dunelm Group plc ("Dunelm")

Trading Update

Following the end of its financial year on 4th July 2009, Dunelm, the leading out-of-town specialist homewares retailer, today makes the following comments on trading.

Sales

Based on data published by the British Retail Consortium we are confident that Dunelm has continued to gain market share in the homewares sector on a like for like basis as well as overall.

We believe that our strong recent sales performance reflects a number of factors including:

Good retail execution; 

Enhanced presence of special buys in store; and

Opportunistic purchasing of additional local media advertising.

Gross Margin

We have continued to deliver strong gross margin performance. Over the financial year as a whole, we expect gross margin to have increased by 120 basis points. 

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Operating Costs

We continue to exercise tight control over costs. As indicated previously, logistics costs have grown in the year to support the increased proportion of special buys in our sales mix. In addition, advertising investment has increased as we have exploited opportunities to purchase additional press and radio coverage at favourable rates. The combined year on year cost increase in logistics and advertising is approximately £3.0m. 

Store Portfolio

With six superstore openings achieved in the financial year, the Group now trades from 82 superstores and 12 older format high street stores. 

Leases have already been signed for ten units due to open in FY10.

In addition, our refit programme has continued, with six major refits completed in the year. Further refits are planned at a rate of 5-10 stores per year.

We have taken advantage of depressed market conditions to acquire the freehold interest in two stores which were in our leasehold portfolio, at yields which we consider to be very attractive. The combined consideration for these two transactions was £7.3m. We may consider further transactions of this type, although only on an opportunistic basis. We are not currently in active negotiations for further freehold acquisitions on any existing stores.

Financial Position

As at 4th July 2009, the company had net cash resources of £21.2m, together with a committed undrawn revolving loan facility of £40m. The daily average net cash held was £12.2m over the course of the year (£24.4m over the second half). 

Will Adderley, Chief Executive, commented:

"Given the market conditions, we are pleased with our recent trading performance - although as always, we can see lots of opportunities to keep improving.  

"The homewares market has declined in the last twelve months, but having said that consumer spending does not yet appear to have been squeezed to the extent that many commentators were anticipating. Although spending may hold up for a little while yet, the prospect of increasing tax burdens on consumers and the possibility of a return to higher mortgage costs, mean that we remain cautious in our outlook moving into calendar year 2010.

"We believe that, in these testing times, our 'simply value for money' proposition remains powerful for consumers, and that our modest average transaction values of around £25 help us to remain resilient. We will continue striving to give customers even better value in the coming year." 

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Dunelm will make its preliminary results announcement on Tuesday 15th September 2009. 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 Kate Vere-Hodge of Hogarth Partnership on 020 7357 9477 or kverehodge@hogarthpr.co.uk

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For further information please contact:

Notes to Editors 

Dunelm is amongst the top 10 retailers operating in the £12bn UK homewares market. The Group has 94 stores, branded Dunelm Mill, of which 82 are out-of-town superstores. 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 Company's move into the broader homewares market.

The 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 12,000 products available.

Dunelm is listed on the London Stock Exchange (DNLM.L).