Dunelm Regulatory News (DNLM)

8th July 2014

Dunelm Group plc

Year-end Trading Update

Dunelm Group plc ("Dunelm" or "the Group"), the UK's leading homewares retailer, provides the following update on trading for the final quarter of its financial year to 28th June 2014, and for the 52 weeks ended on that date.

Revenue

Over the full financial year, total sales grew by 7.8% and like for like ("LFL") sales by 2.1%.

Final quarter LFL sales growth of 5.5% continued the improving trend of previous quarters. This reflects in part the impact of the summer 2013 heatwave which held back performance in the early part of this financial year, but also the positive impact on sales from our investment in key growth initiatives.

Dunelm has a well-established track record of successfully investing in its customer proposition to grow market share. Our latest investments continue our strategy of strengthening and differentiating our customer proposition for the long term. These include the investment made in our new multi-channel fulfilment operation introduced in October, our first national TV advertising and the roll-out of our 'Dunelm At Home' proposition. These have all been well received by customers and we expect the sales benefit from them to continue into the new financial year.

Sales from new space contributed 5.7% growth over the full financial year, reflecting our continuing strong store expansion programme which included 12 new openings2 in the year.

Gross Margin

Expansion of gross margin continues to benefit from our ongoing direct sourcing programme. Against a challenging comparative, gross margins for the final quarter are estimated to have improved by approximately 50 basis points year on year, with 80 basis points improvement for the full financial year.

Profit before tax

Taking into account the solid trading performance in the final quarter and the planned increase in the rate of revenue investment during the year, the Board anticipates that profit before tax for the year will be approximately £116m.

Strategy

Investment to expand the business and further differentiate our customer proposition continues, with a clear focus on enhancing our market leading choice and increasingly specialist expertise. To reinforce this positioning and to drive greater brand awareness, we will continue to build upon our successful national television advertising campaigns, which were aired during the year at a cost of approximately £3m.

Our specialist expertise is delivered to customers both in-store and through new services such as 'Dunelm At Home'. This home design service is now available nationwide, having been extended from 26 to 75 stores during the financial year. Whilst significant initial costs have been incurred, we have seen a pleasing level of customer take-up of the service. 

Our on-line offering gives customers added convenience by providing multiple ways to shop and therefore continues to be an important driver of revenue growth, albeit currently operating at a lower level of profitability than our traditional store channel. Over the financial year as a whole, multi-channel revenues represented 6% of total sales, increasing to 7% in the final quarter. This summer we will complete an upgrade to our front-end web platform, further improving customer experience, giving the opportunity for ongoing enhancements and supporting further revenue growth.

In aggregate, incremental revenue investments in advertising and in building sustainable differentiation in our offer totalled over £5m in the year just ended.

Having opened two new stores in the quarter our superstore portfolio now comprises 136 stores, compared with our medium term target of 200 UK superstores. With five new leases signed since our last update, the pipeline of legally committed new store opportunities now stands at 113, all anticipated to open in the financial year to June 2015.

Financial Position

The Group remains strongly cash generative with closing cash of approximately £22m4. Daily average net cleared funds over the period since our special dividend in October 2013 were £44.7m.

Commenting on Dunelm's performance, Nick Wharton, Chief Executive, said:

"We have continued our strategy of increasing scale through new store openings and multi-channel growth whilst investing in our customer proposition for the future. During the period we have increased the rate of that investment, ensuring we continue to provide our customers with market leading choice and expertise, helping us to maintain our differentiation from competitors over the long term.

"With a strong pipeline of new stores, further enhancements to our multi-channel capability and a positive response to the continuing development of our customer proposition, the Board remains confident in the Group's long-term growth prospects."

Ends

For further information please contact:

Announcement of Preliminary Results

Dunelm will make its preliminary results announcement on Thursday 11th September 2014. There will be a presentation for analysts at 10.15am in the offices of UBS, 1 Finsbury Avenue, London EC2M 2PP. Those analysts who wish to attend are requested to contact Naomi Lane of MHP on 020 3128 8100 or Naomi.lane@mhpc.com . A copy of the presentation will be made available on the Dunelm website.

Notes

1. Like for like sales represent revenues from stores trading for at least one full financial year prior to 30th June 2013 and exclude stores with significant change of space in the current or previous financial year.

2. Of the 12 new superstore openings in the year, two were relocations of existing superstores and one was a new superstore replacing two high street shops.

3. Of the 11 committed new stores, one represents the relocation of an existing high street shop to a larger superstore.

4. Year-end cash is the balance recorded in our accounts, which will differ from the balances shown by our banks due to timing differences (chiefly month-end payments processed in our ledgers but not yet cleared through the bank).

5. Quarterly sales and margin analysis:

*estimated

Notes to Editors

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.

Since then, Dunelm has grown to become market leader in the £11bn UK homewares market. The Group currently operates 143 stores, of which 136 are out-of-town superstores and 7 are located on high streets, and an on-line store, to be found at www.dunelm.com.

Dunelm's customer proposition offers industry-leading choice of quality products at keen prices, with high levels of availability and supported by expert, 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 a made to measure curtain service, including in-home consultation and using its own UK manufacturing facility, together with an authoritative selection of curtain fabrics on the roll in stores. The value, breadth of choice and expertise inherent in the proposition are communicated to customers via the strapline "There's no place like Dunelm".

Dunelm has been listed on the London Stock Exchange since October 2006 (DNLM.L) and has a current market capitalisation of approximately £1.7bn.