Dunelm's revenue rebound in second quarter after 'difficult' first

Dunelm’s second quarter revenue improved following a “difficult” first quarter, as the homewear retailer benefited from a recent acquisition that intensified its focus on the online channel.

Revenue rose 6.6% in the 13 weeks ended 31 December to £261.9m, compared to the same period last year, while revenue excluding the November acquisition of Worldstores increased 3.3% to £253.8m. Like-for-like sales were up 0.2%.

Due to the change in the accounting period end date, the results include six days of the winter sale, compared to eight days last year, without this, the retailer said that LFL growth would have been about £4m higher, which is expected to reverse in the second half of the year.

The online business continued to grow, with a 21.7% increase in home delivery sales.

Chief executive John Browett, said: "Following a difficult first quarter we have seen an improvement in performance both in our stores and online. It was encouraging to see customers respond well to our seasonal product lines, especially our new Christmas offer. We have continued to outperform the homewares market in what is a challenging and volatile retail environment.”

Around £6.2m has been invested in working capital in Worldstores, which has generated £8.1m of revenue since the acquisition, with £1m of the sale price having been paid so far and the remaining £7.5m due to be paid by the end of January.

At the end of December Dunelm had about £103m of net debt, reflecting the investment in Worldstores as well as the acquisition of two freehold properties.

The company estimates that the gross margin percentage for the half year to be broadly flat compared with the last year, while in the quarter, it started to see some impact from adverse currency conditions, affecting goods sourced directly or from third parties. Dunelm expects this to increase as it moves into the second half of the year.

The supply chain was improved with the opening of a new warehouse and the consolidation of suppliers, which caused some disruption to in-store availability, costing £3m.

Browett said: "We continue to focus on and invest in our key strategic initiatives, which will improve the business over the medium term, whilst ensuring we maintain our unique offer of tremendous value for money, combined with an unrivalled range and great service."