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Dunelm shares jump as UK retailer sees sales growth on Worldstores acquisition

Dunelm is targeting sales of £2bn over the medium term as it makes progress with the integration of Worldstores

Dunelm
Dunelm says the trading environment for retailers remains challenging

Dunelm Group PLC (LON:DNLM) posted a drop in full year profits and sales but shares rose as the UK homewares retailer said it expects to deliver future growth on the back of its recent Worldstores acquisition.

Profit before tax in the year to 1 July was £92.4mln, down 28.3% on a reported basis from £128.9mln last year, including £16.9mln exceptional charge related to the purchase and integration of Worldstores.

Revenue rose 8.5% to £955.6mln from £880.9mln a year ago, with a £54.5mln contribution from Worldstores businesses over the past seven months. Excluding Worldstores, revenue increased 2.3%, boosted by online sales.  Like-for-like sales, however, dropped 0.5% due to a lower footfall in stores.

Chairman Andy Harrison said the company expects the trading climate for UK retailers to remain challenging as a decline in disposable incomes puts a squeeze on consumers.

“Nevertheless, we have a full programme of management actions underway to further improve the Dunelm customer proposition, both online and in-store, increase our business efficiency and support our colleagues,” he said.

He added that sales in the first two months of the new financial year have “started positively”, supported by favourable weather comparatives.

The integration of Worldstores is going well and the company is confident of the benefits the business will generate, Harrison said.

"The Worldstores acquisition provides a step change in our online scale, product range and capability.”

Dunelm to double its sales

The company aims to double its sales to £2bn over the medium-term, with 30% to 40% from its online channel.

It expects to open eight new stores in the first half of the year of which four are already open.

Reflecting its confidence in the year ahead, Dunelm raised its full year dividend by 2.6% to 26p each.

Shares jumped 9.09% to 667.00p in afternoon trading. 

Worldstores deal 'accelerates progress', says UBS

Dunelmn bought WS Group, which owns the Worldstores, Kiddicare and Achica brands, in November for £8.5mln.

UBS said: "The WS business has brought a huge increase in product range, an improved two-man delivery service, improved IT skills and an entry into the nursery category (Kiddicare departments will open this year).

"All this could have been achieved over time via additional organic capital expenditure but the deal accelerates progress, at the expense of additional P&L losses and exceptionals."

Quick facts: Dunelm Group plc

Price: 875.5 GBX

LSE:DNLM
Market: LSE
Market Cap: £1.77 billion
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