Dunelm growth positive as it cuts unprofitable Worldstores lines

Dunelm reported “strong” like-for-like revenue growth of 6.9% in its interim results on Wednesday, to £473.9m, with increases coming from both in-store at 3.8%, and online at 35.8%.

The FTSE 250 home furnishings retailer said reported like-for-like revenue was £506.7m - also an improvement of 6.9%.

It said that, during the 26 weeks to 29 December, it saw growth in unique customer numbers both in-store at 4.3% and online at 18.7%, which combined with improved brand awareness to produce the positive result.

Dunelm claimed that its “multichannel proposition” continued to develop since the acquisition of online retailer Worldstores in 2016, and now represented 15.7% of total revenues, which was up 3.9 percentage points on the prior year.

Its gross margin improved 170 basis points to 48.6% on an underlying basis, which the board put down to improved sourcing, foreign exchange benefits, and the removal of less profitable Worldstores lines.

Profit before tax stood at £70.0m on a reported basis - up 16.7% year on year - and was ahead 24.3% on an underlying basis at £60.0m.

Dunelm sadi cash conversion remained “strong”, with free cash flow surging to £91.2m from £27.8m.

The board declared an increase in the interim dividend of 7.1%, to 7.5p.

“It's been a good first six months with our strong performance reflecting the focus we have placed back on the core Dunelm business,” said chief executive officer Nick Wilkinson.

“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.”

Wilkinson said the group traded “well” through its key winter sale period, with the board remaining “pleased” with the company’s performance to date.

“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.

“We are confident in delivering market expectations for the full year assuming no material change in the macro-economic environment.

“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.”