21 July 2022

Dunelm Group plc

Full year trading update

Dunelm Group plc ("Dunelm" or "the Group"), the UK's leading homewares retailer, updates on trading for the 13-week period ended 25 June 2022 and for the full year.

¹ Digital includes home delivery, Click & Collect and tablet-based sales in store.

² For statutory purposes, FY22 will include a 53^rd week. We will disclose our preliminary results on a 53-week basis.

Highlights

·    Strong performance with full year sales and profit before tax slightly ahead of analyst consensus³

·    A bigger and better business post-Covid with total sales more than 40% higher than FY19, driven by significant market share gains and reflecting the strength of our total retail system

·    Solid performance in Q4 against tough comparatives

³ Company compiled consensus range of analysts' estimates for FY22 PBT on a 52-week basis is £195m to £212m, with average consensus of £207m. FY21 PBT was £158m.

Strong sales growth across the total retail system

FY22

Sales for the full year of £1,552m were 16% higher than FY21 and 41% higher Yo3Y. Digital sales of £537m were more than 2.5x higher than pre-Covid levels⁴, when the digital sales mix was 20%. The full year digital mix of 35% was 11%pts lower than FY21, reflecting the fact that only home delivery and Click & Collect services were available when our store estate was closed for over one third of FY21.

Total sales includes significant market share gains⁵, reflecting the strength of our total retail system and the substantial development of our digital capabilities and homewares proposition over the last three years.

Q4 FY22

Sales in the final quarter were 6% lower than in Q4 FY21 and slightly ahead of analyst expectations. Strong sales in the comparative period were driven by pent-up demand after the re-opening of our stores in April 2021, following the third national lockdown (Q4 FY21 growth of 44% on a 2YoY basis). This impact was partially offset by the return of our Summer Sale to its usual timing in June. Digital sales made up 37% of total sales in the quarter.

⁴ The pre-Covid period is represented by FY19 when digital sales included home delivery and reserve & collect.

⁵ Dunelm sales growth of 16% compared to FY21 (including benefit of store closure period in the prior year), GfK Leaderpanel combined homewares and furniture (excluding low-participation categories) decline of 4%. Compared to the pre-Covid period, Dunelm sales growth of 41% versus FY19, GfK Leaderpanel combined homewares and furniture (excluding low- participation categories) growth of 6%.

Strong profit performance

We expect that profit before tax for the 52-week period will be slightly ahead of analyst consensus of £207m. This performance reflects both the particularly strong profitability in H1, when store sales bounced back following re-opening, and robust trading in the second half.

Gross margin rate for the full year of 51.2% was 40bps lower than FY21, primarily due to high customer participation in the June 2022 Summer Sale event⁶.  We anticipate gross margin returning to a long run average in FY23. 

We will report our full year results in September on a 53-week basis for statutory purposes, with disclosures for the comparable 52-week period.

⁶ Our Summer Sale event usually takes place in the final month of the financial year. In 2021, the Summer Sale was delayed by one month and as a consequence FY21 included only one Sale event (our Winter Sale) while FY22 included three events.

Business development

We are committed to long-term decisions as we develop our business. In the quarter we continued to invest in our proposition and capabilities: opening two new and two refitted stores, releasing new digital functionality to make it easier and more convenient for our customers to shop, and strengthening our product capabilities, especially in curtains and blinds.

Summary

We are pleased with our performance in FY22 and trading in the first half of July has got off to a solid start.

Dunelm has a growing customer base and broad appeal, offering customers unrivalled choice, quality and value. Our wide product range, which includes a variety of everyday essential items, delivers value at all price points, with a relatively low average item price.

We have a strong and advantaged business model and a product range which benefits from being  largely own brand and not highly seasonal, and which is sourced mainly via our committed suppliers. Our total retail system combines the advantages of physical and digital propositions with local, friendly and expert service, which enables us to offer great value to customers.

Whilst Dunelm is not immune to the impacts of inflationary pressures on the consumer, we have demonstrated resilience in tougher conditions. We have a strong  operational grip across the business, and a track record of learning and adapating to changing environments, historically emerging stronger following periods of consumer uncertainty.

We have consistently delivered market share gains over the long term, and believe we have a significant opportunity to further expand our leading position. The strong cash returns we generate provide the ability to invest for long-term growth, by continuing to adapt and evolve our customer proposition.

Nick Wilkinson, Chief Executive Officer, commented:

"Dunelm is a much bigger and stronger business than before the pandemic, with sales over 40% higher, due in large part to the huge strides we have made to develop our digital capabilities. Our growth continues to be driven by increasing market share as our customer base further expands. 

"The macro outlook remains uncertain and we cannot predict exactly how consumers will respond to the increasing pressures on their finances. We are currently seeing customers adapt to this environment in their own ways, utilising  the breadth of our offer and price points across homewares; value and choice has always been at the very core of Dunelm, and we are intensely focused on continuing to strengthen this for our customers.

"The business has successfully navigated previous periods of consumer uncertainty. With the inherent strength of our business model and strong operational grip, we have never been more confident about our ability to make the right long-term decisions for all of our stakeholders and to continue to grow our market-leading position."

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Next scheduled event:

Dunelm will make its preliminary results announcement on 14 September 2022.  

Quarterly analysis:

Notes to Editors

Dunelm is the UK's market leader in homewares, with a specialist offering for customers across multiple categories via its 177 predominantly out-of-town superstores and website, dunelm.com.

The business was founded in 1979 as a market stall, selling ready-made curtains. The first shop was opened in Leicester in 1984, with the first superstore opening in 1991. With a vision to become the 1st choice for home, Dunelm offers quality, value and style throughout its extensive product range, alongside services such as Home Delivery, Click & Collect and Made to Measure window treatments. From its textiles heritage in areas such as bedding, curtains, cushions, quilts and pillows, Dunelm has broadened its range into categories including furniture, kitchenware, dining, lighting, outdoor, craft and decoration. Its c.50,000 product lines include specialist own brands and labels such as Dorma and Fogarty, sourced from long-term committed suppliers.

Dunelm's purpose is 'To help create the joy of truly feeling at home. Now and for the generations to come'. The business is headquartered in Leicester and employs over 11,000 colleagues. It has been listed on the London Stock Exchange since October 2006 (DNLM.L) and has a current market capitalisation of approximately £1.7bn.