Last checked at 12 Jan 2010 07:00
12th January 2010
TRADING UPDATE
26 weeks to 2nd January 2010
Strong First Half Trading
Dunelm Group plc ("Dunelm" or "the Group"), the leading specialist homewares retailer, issues the following trading update in respect of the 26 week period to 2nd January 2010.
Sales
The Group achieved the following sales result for the period:
| FY10 (H1) | FY09 (H1) | |
| Total sales | £254.2m | £201.8m |
| Total sales growth | 26.0% | 2.3% |
| LFL sales growth/(decline) | 15.4% | (5.6%) |
These FY10 figures 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. We estimate that this has contributed approximately 2 percentage points to LFL growth over the half year (approximately 4 percentage points in the second quarter).
Adjusting for the above calendar effect, underlying LFL growth was 15.4% in the first quarter of the financial year and 11.6% in the second.
The Board considers that the Group has traded strongly over the period, albeit against weak comparative figures. Our Simply Value for Money proposition continues to be executed well, successfully attracting more customers to our stores, and market share has increased.
Gross Margin
Gross margin is estimated to have improved by 200 basis points over the period. Some product costs increased in the period as a result of the weakness of sterling. However, our active management of gross margin meant we were able to offset those cost increases whilst maintaining our advantageous price position in the market. Gross margin was further improved from sourcing gains, achieved mainly due to increased buying power associated with the rising volumes the Group has enjoyed in recent months.
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.
Store Portfolio
Six new superstores have been opened in the financial year to date, in Norwich, Londonderry, Broadstairs, Bridgend, St Helens and Cheltenham. This brings the total number of superstores to 88.
Four major store refits have been completed so far this financial year, at a cost of approximately £0.7m per store. Sales uplifts in recently refitted stores are encouraging, with an average uplift of approximately 10% measured against comparable non-refitted stores.
Financial position
As at 2nd January 2010 net cleared funds amounted to £45.9m. The average daily net cash position over the half year was £40.1m.
Outlook
The Board remains cautious in its expectations for trading in the second half. The calendar effect related to the winter sale will depress LFL growth in the half by around 2 percentage points; the year-on-year benefit of competitor withdrawals will pass; and general consumer spending is likely to be adversely affected by broader economic factors. Moreover, comparatives become more demanding as the Group's LFL performance in the second half of FY09 showed significant improvement, with growth of 5.0% (compared with a decline of 5.6% in the first half).
The rate of margin gain enjoyed in the first half is not expected to be sustained as the consumer environment becomes more challenging.
The Board does not anticipate any significant new LFL cost pressures in the short term, although the continuing development of the Group is likely to result in non-store cost increases, including the impact of increasing warehousing capacity in mid-2010.
A further 6 new store openings are planned in the second half, giving a total of 12 for the year. As at the date of this announcement, the Group is legally committed to 8 new stores.
Commenting on Dunelm's performance, Will Adderley, Chief Executive, said:
"I am delighted with our excellent trading performance over the last six months and I thank all members of the Dunelm team for helping to achieve this. Looking ahead, it will become much more difficult to sustain like for like growth over the next six to twelve months. However we have a strong pipeline of new stores coming through so I am confident that our overall business will continue to grow and to become stronger."
Dunelm will release its interim results on 25th February 2010. 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 Hogarth Partnership on the number below. A copy of the presentation will be made available on the Dunelm website.
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 / Simon Hockridge |
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 100 stores, branded Dunelm Mill, of which 88 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 £800 million.