TIDMDNLM
RNS Number : 0012T
Dunelm Group plc
15 July 2020
15 July 2020
Dunelm Group plc
Fourth quarter trading update
Dunelm Group plc ("Dunelm" or "the Group"), the UK's leading
homewares retailer, provides an update on its current trading
performance and financial position for the year to 27 June
2020.
Restarting our operations
We closed both stores and online on 24 March and over the last
three months have gradually re-opened all(1) of our operations in a
phased and controlled manner. Our first priority throughout the
crisis has been the health, safety and wellbeing of our customers
and colleagues. The social distancing and other measures we have
introduced in our mainly out-of-town superstores and fulfilment
operations have enabled us to offer a safe shopping and delivery
experience.
1 We expect to open our Pausa cafés towards the end of July.
There are 148 Pausa cafés across the store estate.
We restarted and gradually scaled up our online operations from
the end of March and when our stores moved from 'non-essential' to
'permitted' status under Government rules in mid-May, we began a
phased reopening programme. Most of our stores were open by the end
of May and all 173 were open by 22 June.
During this period, we have benefited from the investment we
made in our new digital platform, enabling significant online
growth and allowing us to introduce new ways of serving our
customers such as virtual Made to Measure consultations and a 'dark
store' contactless click and collect offer.
Trading update
As previously reported, total sales for the 10 weeks to 7 March
grew by 7.9%. Total sales for the last 16 weeks (from 8 March to 27
June) declined by 29.0%, with store like for like ("LFL") sales
down 49.7% and online growth of 85.2%.
The table below shows the monthly total sales trend during the
fourth quarter and the strength of the online offer. The strong
recovery of sales in June was driven by a number of factors,
including a level of pent-up consumer demand and the delayed start
to our Summer Sale.
Year on year change April May June Q4
%
Total sales -78% -48% +20% -28.6%
------ ------ ------ --------
Online (Home delivery
sales) +49% +141% +121% +105.6%
------ ------ ------ --------
We have been operating our digital fulfilment channels at record
volume levels. Home delivery fulfilment from our central
distribution facility exceeded previous record levels in every week
since April, and our supplier partners have increased their 'direct
to customer' fulfilment capacities (running at 4x pre-crisis
levels) to meet increased demand. However, due to high demand,
online availability, delivery lead times and service levels have
been under pressure.
Since the stores have fully opened, online home delivery sales
have been c. 30% and click and collect have been c. 12% of the
total sales mix respectively. As customers become more comfortable
with the physical shopping experience under social distancing
rules, we may see this digital proportion reduce, but it is
difficult to predict future trends at this point in time.
Financial performance and position
At the start of the crisis we took quick and decisive action to
manage our cash position and reduce our costs. We paused our
overseas stock orders and asked our UK suppliers to stop
replenishing our stores. Our Board and Executive team took
voluntary pay reductions for three months and we cancelled the
interim dividend. We made significant operational cost savings and
effectively put our stores into hibernation, utilising the
government Job Retention Scheme ("JRS") to preserve jobs where the
work had temporarily gone away. The majority of our colleagues who
were furloughed are now back at work. Claims under the JRS in FY20
were approximately GBP14.5m and we are no longer making claims in
the new financial year.
These actions enabled us to partially offset the financial
impact of the store closure period and to maintain a strong balance
sheet. Having been loss making in April and May due to stores being
closed, we returned to profitability in June.
Full year FY20 sales were GBP1,057.9m, a 3.9% reduction on the
prior year (FY19: GBP1,100.4m). We expect that our FY20 PBT(2) will
be in the range of GBP105m-GBP110m (FY19: GBP125.9m).
2 FY20 PBT on IFRS 16 basis; FY19 on IAS 17. We estimate the
impact of IFRS 16 on FY20 PBT to be a reduction of c. GBP2.5m.
FY20 gross margin was approximately 70bps higher than FY19, with
second half margins broadly flat year on year as sourcing gains
were offset by additional clearance activity following the
unexpected store closure period. At year-end we had a clean
inventory position with minimal exposure to seasonal stocks.
As at 27 June 2020, we had an underlying net debt position of
c.GBP35m, reflecting that the actual net cash position of GBP45m
included the benefit of approximately GBP80m of working capital
inflows (both exceptional creditors, including VAT deferrals, and
the delayed timing of stock inflows) which we expect to largely
reverse in FY21.
As previously reported, the Group has access to existing
financing facilities of GBP175m and secured eligibility from the
Bank of England for funding under the COVID Corporate Financing
Facility ("CCFF"). We do not anticipate that we will need to draw
down on the CCFF facility.
Outlook
We have been pleased with the strong customer response since
re-opening. Whilst the homewares market has proven to be relatively
resilient, we continue to take a cautious view of the short to
medium term outlook given the ongoing uncertainty around Covid-19.
We will monitor consumer trends over the summer and, where
possible, provide further guidance for FY21 at our full year
results in September.
In addition to demand uncertainty, FY21 will be impacted by cost
headwinds directly related to the impact of the virus. Social
distancing measures within the operating models of both stores and
distribution have led to higher costs to operate for the
short-term; in total, we estimate these costs to be around
GBP150,000 per week. Furthermore, we will not be able to deliver
some of the productivity savings that we had previously anticipated
to offset wage inflation (e.g. National Living Wage increases).
We expect that technology costs in the FY21 P&L will
increase by around GBP8m as we continue to invest in our digital
capabilities and no longer capitalise these costs on the balance
sheet, as previously announced. We will also be investing in supply
chain capacity to meet the high growth ambition for our home
delivery channels.
We continue to develop our strategy of being a "customer first,
digitally enabled business", taking into account all we are
learning about our customers and operations during the pandemic.
This has clarified our investment priorities and has led to a
re-focus of our support centre functions, to ensure we maximise the
opportunities ahead. We will provide more detail on these
initiatives at the results in September.
Comment from Nick Wilkinson, Dunelm's Chief Executive
Officer:
"We are incredibly proud of how our team and committed supplier
partners have responded during the pandemic and of what we have
achieved together. Our colleagues have demonstrated exceptional
commitment, agility and resilience to adapt our proposition and
operations and I would personally like to thank them all.
"The decisions we have made over the last few months have been
guided by our principles and values and we are emerging from this
unprecedented period as a stronger business. This has given us the
confidence to accelerate our digital transition and introduce new
ways of serving our customers. There is lots more to do and we are
energised to evolve our customer proposition and operations at
pace, as we continue to navigate an uncertain external
environment."
For further information please contact:
Dunelm Group plc investorrelations@dunelm.com
Nick Wilkinson, Chief Executive Officer
Laura Carr, Chief Financial Officer
MHP Communications 07709 496 125
Simon Hockridge / Rachel Mann / Pete Lambie dunelm@mhpc.com
Next scheduled event:
Dunelm will make its preliminary results announcement on 10
September 2020.
Notes
Quarterly sales analysis:
52 weeks to 27 June 2020
Q1 Q2 H1 Q3 Q4 H2 FY
---------- ---------- ---------- ---------- ---------- ---------- ------------
Total sales GBP262.6m GBP322.4m GBP585.0m GBP284.4m GBP188.5m GBP472.9m GBP1,057.9m
---------- ---------- ---------- ---------- ---------- ---------- ------------
LFL Stores growth(3) 2.9% 1.2% 2.0% -5.1% -53.0% -28.0% -12.7%
---------- ---------- ---------- ---------- ---------- ---------- ------------
LFL Online growth 34.7% 32.1% 33.2% +22.8% +105.6% +64.4% +50.5%
---------- ---------- ---------- ---------- ---------- ---------- ------------
Total LFL growth(4) 6.4% 5.0% 5.6% -1.3% -29.0% -14.6% -4.5%
---------- ---------- ---------- ---------- ---------- ---------- ------------
Total Dunelm growth 7.5% 6.1% 6.7% -0.0% -28.6% -13.8% -3.5%
---------- ---------- ---------- ---------- ---------- ---------- ------------
Total Group growth(5) 5.8% 6.2% 6.0% -0.0% -28.6% -13.8% -3.9%
---------- ---------- ---------- ---------- ---------- ---------- ------------
52 weeks to 29 June 2019
Q1 Q2 H1 Q3 Q4 H2 FY
---------- ---------- ---------- ---------- ---------- ---------- ------------
Total sales GBP248.2m GBP303.6m GBP551.8m GBP284.5m GBP264.1m GBP548.6m GBP1,100.4m
---------- ---------- ---------- ---------- ---------- ---------- ------------
LFL Stores growth 1.3% 7.8% 4.8% 9.8% 12.1% 10.9% 7.7%
---------- ---------- ---------- ---------- ---------- ---------- ------------
LFL Online growth 33.3% 37.7% 35.8% 32.1% 37.0% 34.6% 35.1%
---------- ---------- ---------- ---------- ---------- ---------- ------------
Total LFL growth 4.2% 10.8% 7.8% 12.5% 15.4% 13.9% 10.7%
---------- ---------- ---------- ---------- ---------- ---------- ------------
Total Dunelm growth 7.5% 9.6% 8.7% 12.4% 16.6% 14.4% 11.5%
---------- ---------- ---------- ---------- ---------- ---------- ------------
Total Group growth 0.1% 2.0% 1.2% 6.1% 11.6% 8.7% 4.8%
---------- ---------- ---------- ---------- ---------- ---------- ------------
3 LFL stores: s tores trading for at least one full financial
year prior to 30 June 2019 without any change of space. LFL store
revenues include Click & Collect/ Reserve & Collect sales
and Home Delivery sales in respect of orders placed via in-store
tablets.
4 Total LFL: LFL stores and dunelm.com.
5 Q1 FY19 included Worldstores businesses in the total
Group.
Notes to Editors
Dunelm was founded in 1979 as a market stall business, selling
ready-made curtains. The first shop was opened in Leicester in 1984
and over the following years the business developed into a
successful chain of high street shops before expanding, following
the opening of the first Dunelm superstore in 1991, into broader
homewares categories. Dunelm is now a multi-channel retailer, with
dunelm.com being launched in 2005.
Dunelm is market leader in the GBP13bn UK homewares market and
active in the GBP11bn UK furniture market. It currently operates
173 stores, of which the majority are out of town, and trades
online through dunelm.com . Dunelm employs approximately 10,000
colleagues and sells around 30,000 product lines in store,
increasing to around 55,000 online.
Dunelm, "The Home of Homes", offers a customer proposition of
style, value, quality and ease of shopping. From its textiles
heritage, in areas such as bedding, curtains, cushions, quilts and
pillows, Dunelm has broadened its product range to a complete
homewares offer including the likes of kitchenware, dining,
lighting, seasonal, wall art and rugs. Dunelm is one of the few
national retailers to offer an authoritative selection of curtain
fabrics on the roll and owns a specialist UK facility dedicated to
producing made-to-measure curtains and blinds.
The product range includes many exclusive, own brand designs and
owned premium brands such as Dorma and Fogarty. This is augmented
by a range of other well-known brands and licence agreements.
Dunelm has been listed on the London Stock Exchange since
October 2006 (DNLM.L) and has a current market capitalisation of
approximately GBP2.3bn.
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END
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