Dunelm Group plc Third Quarter Trading Update (2544C)

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RNS Number : 2544C

Dunelm Group plc

12 April 2017

12(th) April 2017

Third Quarter Trading Update

Dunelm Group plc ("Dunelm" or "the Group"), the UK's leading homewares retailer, reports the following trading update for the third quarter of its current financial year, comprising the 13-week period ended 1(st) April 2017.

Revenue

The homewares market remains in decline. We believe that we are continuing to outperform the market and that the margin of overperformance has increased. The market decline began in the fourth quarter last year and we are now approaching its anniversary.

Total revenue for the third quarter rose by 11.4% to GBP255.1m. Total revenue, excluding Worldstores, rose by 1.0% to GBP231.3m. Total like-for-like (LFL) growth (combining LFL stores and Home Delivery) declined by 2.2%.

With Easter being later this year, we expect approximately 1.5% of LFL sales to move from the third to the fourth quarter. This broadly nets off with the 1.7% of LFL sales that moved from Q2 to Q3 as a result of the timing of our Winter Sale compared to last year.

We continue to see strong growth in the online business, including a 21.0% increase in home delivery sales for the quarter.

 
                               13 weeks to 1(st)                   39 weeks to 1(st) 
                                   April 2017                          April 2017 
--------------------  ----------------------------------  ---------------------------------- 
                        Sales    YoY Growth   YoY Growth    Sales    YoY Growth   YoY Growth 
                        (GBPm)     (GBPm)         (%)       (GBPm)     (GBPm)         (%) 
--------------------  --------  -----------  -----------  --------  -----------  ----------- 
 LFL stores             190.8       -8.6        -4.3%       579.8      -20.9        -3.5% 
--------------------  --------  -----------  -----------  --------  -----------  ----------- 
 Home Delivery          21.7        +3.8        +21.0%      55.4        +9.4        +20.5% 
--------------------  --------  -----------  -----------  --------  -----------  ----------- 
 Total LFL              212.5       -4.8        -2.2%       635.2      -11.5        -1.8% 
--------------------  --------  -----------  -----------  --------  -----------  ----------- 
 Non-LFL stores         18.8        +7.1          -         48.5       +18.1          - 
--------------------  --------  -----------  -----------  --------  -----------  ----------- 
 Total Dunelm 
  excl. Worldstores     231.3       +2.3        +1.0%       683.7       +6.6        +1.0% 
--------------------  --------  -----------  -----------  --------  -----------  ----------- 
 Worldstores*           23.9       +23.9          -         32.0       +32.0          - 
--------------------  --------  -----------  -----------  --------  -----------  ----------- 
 Total Dunelm 
  Group                 255.1      +26.1        +11.4%      715.7      +38.6        +5.7% 
--------------------  --------  -----------  -----------  --------  -----------  ----------- 
 

*Worldstores year to date figures represent the eighteen-week period post acquisition from 28th November 2016, until 1st April 2017.

Gross Margin

Dunelm's gross margin percentage (excluding Worldstores) for the quarter increased by approximately 75bps. This reflects a short-term benefit, and we expect half of this benefit to continue into the fourth quarter. The run rate of gross margin going into the next financial year is expected to be broadly flat compared to the same time last year.

Worldstores' gross margin percentage in the quarter improved by approximately 500 bps compared to the first five weeks of trading under our ownership, as our ongoing stabilisation of the business and focus on customer service reduced the level of cancellations and returns.

Worldstores

The integration of Worldstores is going well. Performance continues to stabilise following the acquisition and is in line with our expectations. We continue to expect that the business will be at least break-even in Dunelm's financial year ending 30 June 2018.

We remain excited by the opportunities that Worldstores offers. It will allow us to accelerate the growth of our internet operation and enhance our position as the destination homewares retailer in the UK, both online and offline. Our detailed integration plan should realise significant benefits including:

-- the development of a next day delivery proposition for a much wider range of products including furniture;

-- a better two-man owned delivery service that is more reliable for customers and cheaper to operate;

-- offering Kiddicare products in Dunelm stores and to a greater number of customers online; and

-- a new technology platform that will enable much faster development of products and services for customers.

Store Portfolio

We opened two new stores in the period leaving our superstore footprint at 159 stores, a total increase of seven openings so far this year. We are now legally committed to a further five new stores of which at least one is due to open in the current financial year, and two are to open very early in the next financial year. We have completed six store refits within the year to date and have at least five planned for the remainder of the financial year.

Business Investment

We are continuing to develop our strategic plans and invest in the business, particularly in systems, capability and marketing.

We have considerably improved our supply chain with the opening of a new warehouse and the consolidation of our transport suppliers. As expected the disruption to in-store availability seen during the second quarter has abated and availability has improved to normal levels. We have also seen significantly fewer transitional costs in the second half of the year, compared to the GBP3m of additional costs incurred in the first half.

Financial Position

As at 1(st) April 2017, net debt was approximately GBP117m. Daily average net debt across the third quarter amounted to GBP88m. The movement in net debt reflects the investment in Worldstores, higher capital expenditure on new stores and refits, as well as the acquisition of three freehold properties.

Commenting on Dunelm's performance, John Browett, Chief Executive, said:

"We are trading in a volatile retail environment at present, but have continued to outperform the homewares market and so enhanced our position as market leader. As a result, our expectations for the full year remain unchanged.

"We remain excited by the acquisition of Worldstores. The business has stabilised and our integration plans are developing well. Our home delivery channel goes from strength to strength and will be enhanced by the significant benefits that the acquisition provides to our product range, including the Kiddicare brand, delivery, and speed of IT development.

"We continue to focus on and invest in our long-term growth initiatives, to ensure that Dunelm's low cost model remains a key strategic advantage allowing us to generate cash whilst maintaining our unique offer of value for money, an unrivalled range and great service."

Ends

For further information please contact:

 
 Dunelm Group plc                   0116 2644439 
 John Browett, Chief Executive 
 Keith Down, Chief Financial 
  Officer 
 
 MHP Communications                 020 3128 8100 
 John Olsen/Simon Hockridge/Gina    [e-mail] 
  Bell 
 
 

Forthcoming Newsflow:

Dunelm's Q4 trading update will be on 7(th) July 2017. The full year results announcement will be on 13th September 2017.

Notes

1. Like-for-like (LFL) sales represents revenues from stores trading for at least one full financial year prior to 3(rd) July 2016 and excludes stores with significant change of space in the current or previous financial year.

   2.     Quarterly sales and margin analysis (excluding Worldstores): 
 
                                  39 weeks to 1st April 2017 
--------------  ------------------------------------------------------------- 
                    Q1          Q2          H1          Q3       Q4   H2   FY 
--------------  ----------  ----------  ----------  ----------  ---  ---  --- 
 
 Total sales     GBP198.7m   GBP253.8m   GBP452.4m   GBP231.3m 
--------------  ----------  ----------  ----------  ----------  ---  ---  --- 
 
 Total sales 
  growth           -1.8%       3.3%        1.0%        1.0% 
--------------  ----------  ----------  ----------  ----------  ---  ---  --- 
   LFL sales 
    growth         -3.8%       0.2%        -1.6%       -2.2% 
--------------  ----------  ----------  ----------  ----------  ---  ---  --- 
 
 Gross margin      0bps       +10bps       +5bps      +75bps 
  growth* 
--------------  ----------  ----------  ----------  ----------  ---  ---  --- 
 

*estimated

 
                                               52 weeks to 2(nd) July 2016 
-----------------  ---------------------------------------------------------------------------------- 
                       Q1          Q2          H1          Q3          Q4          H2          FY 
-----------------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
 
 Total sales        GBP202.3m   GBP245.7m   GBP448.1m   GBP229.0m   GBP203.8m   GBP432.8m   GBP880.9m 
-----------------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
 
 Total sales 
  growth              12.0%       8.8%        10.3%       5.9%        1.8%        3.9%        7.1% 
-----------------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
   LFL sales 
    growth            5.5%        3.9%        4.6%        1.1%        -0.6%       0.3%        2.5% 
-----------------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
 
 Gross margin        +20bps      +30bps      +30bps      +90bps      +80bps      +90bps      +60bps 
  growth/decline 

-----------------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
 

Notes to Editors

Dunelm is market leader in the GBP11bn UK homewares market. It currently operates 163 stores, of which 159 are out-of-town superstores and 4 are located on high streets, and an online store, to be found at www.dunelm.com.

The company acquired the assets of Worldstores, including Achica and Kiddicare, on the 28(th) November 2016. Worldstores is one of the UK's largest online retailers of products for the home and garden, with over 500,000 products on the site. Achica is a members-only online store offering furniture, homewares and accessories, often at significant discounts to RRPs for limited periods through flash sales. Kiddicare is a multichannel retailer, selling nursery supplies and merchandise for children and young families.

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 Fogarty, 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 has been listed on the London Stock Exchange since October 2006 (DNLM.L) and has a current market capitalisation of approximately GBP1.3bn.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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April 12, 2017 02:00 ET (06:00 GMT)