Dunelm grows profits but remains ‘cautious’ as Brexit-related risks approach
Profit and revenue climbed at Dunelm in the first six months of its financial year, the home furnishing retailer revealed today, but also warned its outlook is “cautious” in the face of Brexit uncertainty.
The figures
Profit before tax grew 14 per cent year on year to £70m while like-for-like revenue rose 6.9 per cent to £506.7m for the six months to the end of December, Dunelm said.
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Overall revenue grew 1.2 per cent to £551.8m.
Free cash flow tripled to £91.2m compared to the same half in 2017, while the furniture maker slashed net debt almost in half, down from £134.3m this time last year to £72.9m now.
Basic earnings per share also grew 13 per cent to 27.6p, while Dunelm was set to pay investors a dividend of 7.5p per share, up half a penny from last year.
Shares grew 3.5 per cent in early trading to 742p.
Why it’s interesting
Dunelm’s positive results were underlined by strong like-for-like growth both online and offline, with like-for-like sales increasing 6.9 per cent overall.
Store like-for-like sales were up 3.8 per cent and online like-for-likes got a whopping 35.8 per cent boost.
The furniture maker also posted a comfortable rise in customer numbers, welcoming 4.3 per cent more shoppers in-store and 18.7 per cent more visitors online.
However, the firm admitted it has set aside under £2m for Brexit stockpiling as the UK’s departure date of 29 March approaches with no deal with the EU yet in hand.
“We have identified some risks arising from potential disruption at deep-sea ports in the period following exit,” the company said.
“Actions have been taken within the business and throughout our supply chain to mitigate these risks, such as purchasing incremental stock of some best-selling lines and securing additional supply chain capacity.”
While Dunelm is confident of meeting market expectations, it said its outlook remains “cautious” in the face of Brexit uncertainty.
Kate Heseltine, analyst at Edison Investment Research, said Dunelm's focus on the core business is paying off, after the firm ditched its less profitable Worldstores lines.
AJ Bell investment director Russ Mould added that Dunelm's results show it is not simply relying on digital to make up for a decline in store revenue.
"Unlike many of its rivals this is not a case of internet sales coming to the rescue of ailing bricks and mortar stores," he said. "The online side is growing faster but both parts of the business are currently heading in the right direction.
“A more flexible web-based platform is due to launch in the summer and this could help reinforce the company’s position."
What Dunelm said
Chief executive Nick Wilkinson said: “The like-for-like revenue growth, both in stores and online, demonstrates the progress we are making in improving our multichannel proposition whilst maintaining the breadth and depth of our specialist customer offer in homewares.
“On top of this, good operational discipline and keeping things simple, is driving a better financial performance."
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“As previously highlighted, we are cautious about the outlook for the remainder of the financial year due to the continuing political uncertainty in the UK.
“Looking to the future, we will continue to grow the business as we become a truly multichannel homewares destination, making Dunelm the first choice for even more customers, and further strengthening our market leading position.”