Interactive Investor

Dunelm in focus after store reopenings double sales

14th July 2021 09:23

Keith Bowman from interactive investor

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This homewares retailer has again raised its full-year profit forecast. We assess prospects. 

Fourth-quarter trading update to 26 June 

  • Total sales up 101.7% to £380.1 million
  • Digital sales up 38% year-over-year
  • Expects full-year pre-tax profit to be approximately £158 million, up from a range between £149 million and £153 million

Dunelm (LSE:DNLM) has used the challenges of the pandemic and closed stores to successfully boost its digital sales. 

Online sales are up by 38% compared to the same quarter this time last year. Click & Collect sales now account for about one-quarter of its total digital sales, with further investment across its digital offering set to be made. 

Expected profit for the full year has again been raised, helped by stronger than expected sales since the reopening of its stores following pandemic lockdowns. 

A buoyant housing market and more time spent at home due to the Covid crisis are likely playing into its hands. Demand for bedding, curtains, bathroom textiles and cushions, and newer categories such as dining furniture has proved strong. 

For investors, a more than doubling in the share price since pandemic market lows in March 2020 has already priced in much of the good news. An estimated price/earnings ratio above the 10-year average also suggests the shares not obviously cheap. And, like other retailers, Dunelm continues to suffer disruption within its global supply chain.

But its greatly increased digital related sales boosts confidence that it can successfully compete going forward. A forecast dividend yield in the region of 2.2% is not to be dismissed in the current ultra-low interest rate environment. And its previously detailed 'make & mend' initiative is possibly a nod to wider environmental concerns. In all, with digital sales growing and plans still in place to expand its store portfolio further, market consensus opinion currently points to a 'buy'.

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