The recent wet and cold weather has dampened most of the country’s spirits, but it actually helped UK homeware retailer Dunelm Group PLC (LON:DNLM) boost sales by almost 25% in its first quarter.
In the three months ended September 30, the FTSE 250 firm saw total sales jump 24.8% to £247.9mln (Q1 16/17: £198.7mln).
READ: Dunelm chief executive John Browett steps down with immediate effect
Even when the impact of the five new stores which opened during the period is stripped out, like-for-like sales still grew 9.3% to £214.3mln (Q1 16/17: £196.1mln).
Dunelm – which sells things like bedding, curtains and kitchen equipment – has traditionally been a bricks and mortar retailer, although it is trying to boost its online presence.
That move is starting to bear fruit, with like-for-like online sales jumping to £19.9mln from just £13.6mln a year earlier.
Maintaining the momentum
"We have maintained the good momentum from the final quarter of the last financial year,” said chairman Andy Harrison.
“Our like-for-like sales were boosted by favourable weather comparatives and, pleasingly, we continue to outperform the homewares market, with strong growth across the business, especially online.”
He added: “The integration of the Worldstores business continues on plan, with good progress in the quarter.
READ: Dunelm shares jump as fourth quarter revenue bolstered by Worldstores takeover
“We are well on the way to becoming a genuine multi-channel retailer, with 16% of sales in the quarter online.”
Margins dip in Q1
Gross margins took a hit in the quarter due to the lower margin products sold by the recently acquired Worldstores, while a “focus on newness in [its] latest ranges” also impacted margins.
Margins were 220 basis points lower than last year, although Dunelm doesn’t expect this to continue.
“For the full year we expect the Dunelm gross margin, combining store and online, to be in line with the prior year. The group (including Worldstores) margin will be down slightly reflecting the mix effect of Worldstores.”
Are retailers overstating post-Brexit concerns?
"Under promising and over-delivering is a good approach for boards and investor relations departments, but are retailers overdoing ‘post-Brexit tough market conditions’ worries?," asks ETX Capital's Neil Wilson.
"It’s become almost a reflex, with mention in virtually every company update this year. UK retail sales numbers continue to show resilience yet the companies who earn their crust in this environment keep on stressing how tough it is.
"In September Dunelm warned that the trading climate would remain challenging as disposable incomes of the average British shopper come under pressure. Despite this it suggested there had been an encouraging start to the year in the first two months of Q1."
He adds: "Shares in Dunelm have already fallen due to the soft performance last year that saw profits decline more than 28%, but with a resilient UK retail market, online growth from Worldstores building and easier prior-year comparisons, investors are warming again to the shares."
Shares surged 6% to 741.7p at the opening bell on Wednesday.
--Updates for analyst comment--