Dunelm – named as one of the Elite retailers in the RXUK Top500 2020 report, out this week – is bucking the trend in retail, lodging total like for like revenue growth of 5.6%, against a strong comparative period (FY19 H1: 7.8%), with its new digital platform paying dividends and store sales continuing to grow.
The retailer recorded growth in total unique active customers5 of 8.8% underpinned by improved brand awareness and consideration and profit before tax of £83.6m, up 19.4% year on year or 21.3% on a pre-IFRS 16 basis (FY19: £70.0m).
It also recorded strong free cash flow of £64.4m, despite paying £20m additional corporation tax (mainly due to regulatory timing changes).
The retailer completed its move to a new cloud native digital platform in December and is already reaping the rewards. Online sales growing by more than a third (+33.2%) in the second half to £83.4m, while store sales of £485.2m were 2% up on last time.
Nick Wilkinson, Chief Executive Officer, commented: "We have made good progress over the first half, following a strong performance last year, which is reflected in the significant growth delivered in both sales and profits. We continue to build strong foundations for future growth. The successful launch of our digital platform accelerates our ability to innovate our customer proposition and we remain focused on operational improvements across all areas of the business.”
He continues: "We also continue to broaden our customer base and following the successful sponsorship of ITV’s This Morning, which concludes in March, we are excited about our new sponsorship deal with Channel 4’s First Dates programme, starting later this week, which will enable us to reach more customers with the Dunelm brand. The third quarter has started well, with a successful Winter Sale across the total retail system. As a result, we expect full year FY20 profit before tax to be slightly ahead of the top of the latest range of analyst expectations7. We are monitoring the Coronavirus outbreak carefully. To date we have not assumed any material disruption to our supply chain or any financial impact in the year.”
He concludes: "We have plenty to look forward to over the remainder of the year as we strengthen the Dunelm offer and help more customers to create the home they love."
Paul Kirkland, Director of Retail & Hospitality at Fujitsu UK, comments:“Dunelm’s successful results are a positive sign in what has been a difficult period for UK retailers. Contrary to many high-street brands, Dunelm opted against aggressive discounting over the peak sales period, instead focusing its efforts on improving customer experience through its online and in-store offerings – and it has clearly reaped the benefits of what would be considered a bold move by some."
He continues: “And it’s this dedication to customer experience that has been critical to Dunelm’s success. With just 20% of retailers believing their primary goal is to provide brilliant service to customers, retailers must urgently reassess their priorities and the ways that they connect with their customers. One way that they can do that is by turning their stores inside-out; flipping the regular decision-making process on its head and giving those who interact with customers daily, the store colleagues, more say in the store layout and choice of stock. Technology is an enabler for this, helping to free up store staff’s time to truly interact with their customers. Ultimately, to thrive in an ever-competitive market, retailers will need to consider ways they can provide shoppers with an experience that will lure them back to the high street.”
Nigel Frith, a senior market analyst at www.asktraders.com, adds: “What’s not to like? Dunelm has impressed once again with a 20% leap in profits before tax, a solid 5.6% increase in like for like sales and a reduction in net debt in its first half. Dunelm continues to avoid the gloom engulfing many retailers on the UK high street. As retailers across the UK struggle Dunelm is enjoying a robust performance thanks in part to the successful launch of its new online offering, which appears to be ticking all the right boxes and thanks to its broadening customer base following the sponsorship of This Morning. Strong foundations are in place for Dunelm to enjoy a stellar year.”