Although a 53-week reporting year boosted sales by £6m and operating profits by £1m, budget homeware retailer Dunelm still sailed through the recession with minimal effort, as cash-conscious consumers hunted for value.
Like-for-sales dipped by a modest 0.5 per cent in the 12-month period, but rebounded strongly in the second half of the year with a like-for-like gain of 5 per cent, and this helped to raise gross margins by 120 basis points to 45.8 per cent (44.6 per cent in 2008). A drop in working capital of £14.8m boosted cash generation and helped eliminate the company's net debt.
Unlike other hard-pressed rivals in the sector, Dunelm's expansion continues with six new store openings during the year, another three since the year-end and plans to add nine more units to the portfolio. This looks fully justified if the retailer's performance in the first 10 weeks of the new financial year is anything to go by, with like-for-like sales up an impressive 16.1 per cent. Chief executive Will Adderley points out that his company has been benefiting from the value of its product offering, with an average spend per basket of less than £30.
The plan is to expand the current estate of 85 superstores to 150 outlets over the medium term. With little occupier demand for 'big box' retail warehousing space at present, Dunelm looks well placed to continue the roll-out programme. In addition, Dunelm has been upgrading its older stores, completing six refits in the financial year, and it will continue the refit programme at the rate of 5-10 stores per year. To date, the cost has been approximately £0.5m per store, with payback expected in around three to five years.
Seymour Pierce analyst Kate Heseltine said that the company had turned in an exceptional performance, as many retailers are struggling to see any kind of recovery trend. She upgraded pre-tax profit forecasts for 2010 by 10 per cent to £60m, with EPS of 21p.
DUNELM (DNLM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 311p | MARKET VALUE: | £622m | |
| TOUCH: | 311-312p | 12-MONTH HIGH: | 323p | LOW: 121p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 56p | NET CASH: | £24m | |
| Year to 4 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2006 | 315 | 38.0 | 13.1 | * |
| 2007 | 355 | 37.8 | 12.3 | 3.8 |
| 2008 | 392 | 49.1 | 16.8 | 5.5 |
| 2009 | 424 | 53.4 | 18.8 | 6.0 |
| % change | +8 | +9 | +12 | +9 |
Ex-div:02 Nov Payment:05 Dec *Prior to listing | ||||
