Dunelm Q1 sales rise on summer sales but sees supply, cost pressure
By Frank Prenesti
Date: Thursday 14 Oct 2021
(Sharecast News) - Homewares retailer Dunelm reported a rise in first quarter sales, but cautioned that supply-chain and inflationary pressures made the future outlook uncertain as it maintained full-year guidance.
Sales in the three months to September 25 rose 8.8% to £388m. On a two-year pre-pandemic basis they were up 48% with online sales making up 33% of total revenue, an increase of 3 percentage points.
Dunelm said the performance was mainly driven by a positive response to its summer sale in July, which was postponed from the fourth quarter of fiscal 2021, improved product availability and some popular new ranges in its furniture categories.
"Sales growth in the first quarter of the new financial year has been encouraging and we have seen continued outperformance versus the homewares market," the company said in a trading update.
It added that it expected annual results to be in line with recently revised estimates of pre-tax profits in a range of £167m-£190m, with consensus of £179m. First-half gross margin was forecast to be flat-to-slightly-positive with full-year gross margin 50-75 basis points lower year on year, reflecting that the second half is expected to include both a winter and summer Sale.
"The macro outlook remains uncertain, in particular regarding supply chain disruption and inflationary pressures from freight and driver shortages ... we continue to work closely with our long-term suppliers and partners to mitigate the impact of these factors within our supply chain," Dunelm said
"Whilst we are not immune to the challenges being widely reported, we feel well placed relatively to manage them. In particular, we have good stock levels across our stores, warehouses and supplier partners, a low proportion of seasonal ranges within our product offer, and also benefit from a higher propensity for customers to substitute products within homewares categories, given our broad range."
Keith Bowman, analyst at interactive investor said the cautionary comments on the uncertain macro outlook "cannot be ignored".
"Supply chain challenges still need to be navigated, while rising costs for consumers generally may eventually crimp spending."
However, he added that sales momentum remains with the group's investment in its digital channels being rewarded.
"Room for market share gains persists, while the price earnings ratio now stands at a discount to the three-year average. In all, with sales growth ongoing and the dividend having previously recommenced following Covid caution, analyst consensus opinion currently points towards a 'buy'."
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