ii view: Dunelm cautious despite better profit

Full-year results to 29 June

• Revenue up 4.1% to £1.71 billion
• Pre-tax profit up 6.6% to £205 million
• Final dividend of 27.5p per share
• Total ordinary dividend for the year up 3.6% to 43.5p per share
• Total special dividend for the year of 35p per share, down from last year’s 40p per share

Chief executive Nick Wilkinson said: 

“In a period when consumers faced inflationary pressures and competing demands for their disposable income, we have continued to raise the bar on the relevance and value we offer at Dunelm.

"We have made good progress with our growth plans, including the expansion of our store estate, building a faster and better digital experience for customers, and advancing our tech and data capabilities.” 

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ii round-up:

Homewares retailer Dunelm Group (LSE:DNLM) today detailed sales and profit growth in its latest financial year but pointed to continued uncertainty over the timing of a retail sector recovery. 

Sales for the year to late June rose by 4% to £1.71 billion, driving pre-tax profit up 6.6% to £205 million. A 3.6% increase in the total full-year ordinary dividend to 43.5p per share was countered by a reduction in the special dividend to 35p per share from the prior year’s 40p per share. 

Shares in the FTSE 250 company retreated 3% in UK trading having come into this latest news up around 12% year-to-date. That’s similar to DIY firm and B&Q owner Kingfisher (LSE:KGF), although behind a one-quarter gain for fashion chain Next (LSE:NXT).

Dunelm sells items ranging from curtains and bedding to furniture and paints. The retailer pointed to a further 0.6% gain in market share over the year which aided performance, with research from Global Data suggesting a market share of 7.7%. 

Six new stores opened during the year including one relocation, with digital sales coming in at 37% of overall sales compared to 36% during the previous year. 

Sales growth for the 2025 fiscal year ahead is expected to be driven by volume and further market share gains. Dunelm continues to target a medium-term market share level of 10%.  

A first-quarter trading update is scheduled for 24 October. 

ii view:

Starting out as a curtain stall in Leicester market and coming to the stock market in 2006, Dunelm today sells around 85,000 products and services. Employing approximately 11,000 people, the FTSE 250 retailer operates across 184 UK stores with ambition to grow to around 200 outlets. Product lines include specialist own brands and labels such as Dorma and Fogarty, with around 150 stores now offering a Pausa coffee shop.   

For investors, elevated borrowing costs continue to leave consumer disposable income pressured. Ongoing industry-wide supply chain disruption continues to warrant consideration. So do heightened costs more broadly such as wages, while a price-to-net asset value ratio above the three-year average may suggest the shares are not obviously cheap.

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On the upside, gains in market share continue to be made. The group’s product range now stretches into DIY products, such as paint, as well as services such as made to measure window treatments. New stores continue to be opened, while management remains focused on costs with operational improvements being pushed where possible. 

In all, group caution regarding the outlook offers caution, but with more than £1 billion returned to shareholders over the last 10 years and the shares on a forecast dividend yield of around 3.5%, investors appear likely to give Dunelm the benefit of the doubt for now. 

Positives: 

• Growing sales
• Focus on shareholder returns 

Negatives:

• Uncertain economic outlook
• Heighten costs

The average rating of stock market analysts:

Strong hold