Dunelm's (DNLM) shares enjoyed double-digit growth on the day the homeware retailer revealed improved sales during third quarter trading. Overall like-for-like sales grew by 4.6 per cent year on year, compared with a 2.2 per cent contraction during the prior year period. That was led by core online business, where sales grew by more than a third. Encouragingly, Dunelm's stores posted a 1.2 per cent rise in like-for-like sales, building on 3.5 per cent growth during the first half.
However, the 2016 acquisition of online retailer Worldstores – which has taken longer to integrate than initially thought – continued to drag on sales performance. Like-for-like sales here were down 8 per cent during the first three months of the year, although the bulk of that decline was due to the disposal of Achica. Management's focus on not performing loss-making sales on the Worldstores website fed through to group gross margins. They contracted 15 basis points, an improvement on the 180 basis point tightening during the first half.
Chairman Andy Harrison said in September the group wanted to double sales to £2bn over the medium term, with 30 to 40 per cent of these completed online. The target is ambitious, but this focus on online sales appears to have given Dunelm the edge over its retail counterparts, as it benefits from the extended ranges from the acquisition of Worldstores, despite the unimpressive in-store sales figures. Peel Hunt analysts reckon that over one-third of growth comes from the range extension.
These are not bad figures given the current non-food retail environment; overall sales for the sector were down 3 per cent during the three months to March, while homeware and furniture retailers have also performed poorly. Carpetright (CPR) recently entered a company voluntary arrangement (CVA), using the arrangement to exit onerous property leases hampering progress. It plans to close 92 out of 205 underperforming stores, and renegotiate terms on the remainder.
