20th Oct 2022 15:04
(Alliance News) - Dunelm Group PLC on Thursday said it is preparing itself of a "challenging winter", as customers count their pennies like never before.
The Leicester-based homewares retailer started life in 1979 as a market stall selling curtains before going on to open superstores across the UK. Dunelm will hope its down-to-earth reputation will count in its favour in the difficult months ahead.
For the 13 weeks to October 1, the company's financial first quarter, total sales were GBP356.7 million, down 8.3% from GBP388.8 million a year before and by 7.8% from GBP386.7 million in the immediately previous quarter.
This was "as expected, given the very strong comparative period, with Q1 last year benefiting from pent-up demand and our rescheduled Summer Sale", Dunelm explained. Compared to financial 2020, meaning before the Covid-19 pandemic, sales remained up 36%.
Dunelm said digital sales made up 33% of total sales in the recent quarter, in line with the same period last year, and it is continuing to see "robust sales from its total retail system across its categories".
Looking ahead, the retailer noted a "challenging" macroeconomic environment, including recent volatility in exchange rate movements.
However, Dunelm said it is "very well hedged" for the remainder of the year. It reiterated the annual guidance given last month, when it said it expected to achieve a margin of around 50% in the current financial year, which ends on July 1, 2023. Gross margin for financial 2022 had slipped to 51.2% from 51.6% the year before.
Chief Executive Officer Nick Wilkinson said on Thursday: "As we enter what will clearly be a challenging winter for consumers, our absolute focus remains on making every pound count for everyone, through a tight grip on operations. We will continue to offer outstanding value at all price points, so our customers can make their own choices around adapting to the economic backdrop."
Last month, Dunelm reported total sales in the financial year that ended July 2 were up 18% at GBP1.58 billion from GBP1.34 billion the year before. Pretax profit increased 35% to GBP212.8 million from GBP157.8 million.
"Dunelm's sales growth can continue to outperform the market because of its value proposition, extensive retail network, and digital capability," commented Lara Martinez, consumer sector analyst at research house Third Bridge.
She added: "Dunelm could benefit from shoppers trading down from the likes of John Lewis but they do have discounters like B&M [European Value Retail SA] hot on their heels. We expect to see investment in above-the-line advertising to drive customer acquisition."
Dunelm said it will publish its second-quarter results on January 19.
Shares were down 2.0% at 789.50 pence each on Thursday afternoon in London. The stock is down 39% over the past 12 months.
By Tom Waite, [email protected], and Xindi Wei, [email protected]
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