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Dunelm raises FY profit forecast as fourth-quarter sales double
14th Jul 2021 07:02
(Sharecast News) - UK homewares retailer Dunelm said annual profits would be ahead of forecasts as fourth quarter sales more than doubled driven by pent-up demand after stores reopened from Covid lockdown.
Sales were up 101.7% to £380.1m in the 13 months to June 26 and rose 26.3% for the full year to £1.33bn. Fourth-quarter digital sales increased 38%. The company expects pre-tax profits of around £158m, compared with forecasts of £149m - £153m.
Sales growth came from a broad range of categories including bedding, curtains, bathroom textiles and cushions, and newer categories such as dining furniture and decorative accessories, Dunelm said as customers turned to home improvements during Covid lockdowns.
"Click & Collect, representing approximately one quarter of total digital sales, continues to be a popular customer choice even with stores fully re-opened," the company added.
Gross margin in the fourth quarter increased by 460 basis points year on year, higher than previously anticipated due to the company's decision to postpone its summer sale, which would normally be complete by the end of the period, into the start of the 2022 fiscal year.
Dunelm said it expected to return to a normal trading calendar in the 2022 financial year which would result in three sale events within the financial year - as opposed to the usual two - leading to a margin headwind of approximately 70-100bps, it added.
SUPPLY CHAIN DISRUPTION
"Whilst stock levels returned to more normalised levels by the end of the financial year, we continue to experience disruption in the global supply chain as a result of the Covid pandemic. We expect that our inventory levels will increase during the first half of FY22 as we aim to mitigate the ongoing disruption and anticipate incremental storage costs for these higher stock levels," it added.
Chief executive Nick Wilkinson said the company had invested in its digital capabilities during the pandemic to adapt to the changing environment.
"From what we have learned during the pandemic about our customers, colleagues, suppliers and our other stakeholders, we are more confident than ever about the opportunity to increase our market leadership and we will invest further in our proposition to support our growth ambitions," he said.
"With many exciting developments in the pipeline to make us the first choice for home, and grow our customer base and frequency, there is a lot to look forward to."
The company plans capital expenditure of £12m on two extra distribution facilities in the next year, to allow it to continue expanding. One new warehouse is being built at Daventry in the east Midlands - to store heavy and bulky items - and another in Stoke-on-Trent, close to its existing warehouse and distribution centre.
AJ Bell financial analyst Danni Hewson said Dunelm had benefited from "a big surge in DIY activity in order to make the home a nicer place to be" during lockdown.
"It's not all about fixing broken fences and having a splash of new paints on the walls. The home improvement bug also includes the bedding, curtains, blinds and other items sold by Dunelm."
"Fortunately, it had already made a big investment in the digital channel prior to the pandemic so it was able to capitalise on heightened interest in its products as more people went online. Ultimately the trading performance seen over the past year or so would suggest Dunelm falls under the category of 'the strong are getting even stronger'."
Sales were up 101.7% to £380.1m in the 13 months to June 26 and rose 26.3% for the full year to £1.33bn. Fourth-quarter digital sales increased 38%. The company expects pre-tax profits of around £158m, compared with forecasts of £149m - £153m.
Sales growth came from a broad range of categories including bedding, curtains, bathroom textiles and cushions, and newer categories such as dining furniture and decorative accessories, Dunelm said as customers turned to home improvements during Covid lockdowns.
"Click & Collect, representing approximately one quarter of total digital sales, continues to be a popular customer choice even with stores fully re-opened," the company added.
Gross margin in the fourth quarter increased by 460 basis points year on year, higher than previously anticipated due to the company's decision to postpone its summer sale, which would normally be complete by the end of the period, into the start of the 2022 fiscal year.
Dunelm said it expected to return to a normal trading calendar in the 2022 financial year which would result in three sale events within the financial year - as opposed to the usual two - leading to a margin headwind of approximately 70-100bps, it added.
SUPPLY CHAIN DISRUPTION
"Whilst stock levels returned to more normalised levels by the end of the financial year, we continue to experience disruption in the global supply chain as a result of the Covid pandemic. We expect that our inventory levels will increase during the first half of FY22 as we aim to mitigate the ongoing disruption and anticipate incremental storage costs for these higher stock levels," it added.
Chief executive Nick Wilkinson said the company had invested in its digital capabilities during the pandemic to adapt to the changing environment.
"From what we have learned during the pandemic about our customers, colleagues, suppliers and our other stakeholders, we are more confident than ever about the opportunity to increase our market leadership and we will invest further in our proposition to support our growth ambitions," he said.
"With many exciting developments in the pipeline to make us the first choice for home, and grow our customer base and frequency, there is a lot to look forward to."
The company plans capital expenditure of £12m on two extra distribution facilities in the next year, to allow it to continue expanding. One new warehouse is being built at Daventry in the east Midlands - to store heavy and bulky items - and another in Stoke-on-Trent, close to its existing warehouse and distribution centre.
AJ Bell financial analyst Danni Hewson said Dunelm had benefited from "a big surge in DIY activity in order to make the home a nicer place to be" during lockdown.
"It's not all about fixing broken fences and having a splash of new paints on the walls. The home improvement bug also includes the bedding, curtains, blinds and other items sold by Dunelm."
"Fortunately, it had already made a big investment in the digital channel prior to the pandemic so it was able to capitalise on heightened interest in its products as more people went online. Ultimately the trading performance seen over the past year or so would suggest Dunelm falls under the category of 'the strong are getting even stronger'."