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Dunelm hit by September uncertainty despite online sales growth

The homeware retailer said the wobble reflected “in part” the weaker market, at its worst since 1995 according to data released by the British Retail Consortium

Dunelm
Broker Peel Hunt said the cooler months will further strengthen Dunelm’s results despite customer volatility, and reiterated its “add” recommendation

Dunelm Group plc (LON:DNLM) was the biggest faller in the FTSE 250 after a “mixed” performance in September marred an otherwise solid quarter.

The homeware retailer said the September wobble reflected “in part” the weaker market, at its worst since 1995 according to data released by the British Retail Consortium earlier this week.

READ: Dunelm hands out plump special divi as strong trading continues

“Despite the recent softness in the homewares market and the increased political uncertainty, we are confident we can continue to win market share and our expectations for the full year remain unchanged,” said chief executive Nick Wilkinson.

Broker Peel Hunt said the cooler months will further strengthen Dunelm’s results despite customer volatility, and reiterated its “add” recommendation.

Analysts at CMC Markets also kept a positive outlook, saying the FTSE 250-listed firm is in a “strong position to weather the Brexit storm” should the market get weaker.

The firm has been focusing on its digital presence and will launch a new commercial platform before Christmas, although it said it will “retain flexibility” with the transition plans.

The current website cashed in £35.7mln in the first quarter ended 28 September, a 34.7% year-on-year (y-o-y) increase but the online business is still dwarfed by the bricks and mortar estate, which saw like-for-like (LFL) sales rise 2.9% y-o-y to £219.9mln.

Over the full year, Peel Hunt reckons the stores will actually see LFL sales decline, by 0.4% from the year before, with the decline offset by a 15% increase in online sales.

As of 28 September, net debt was £24mln, a 77% drop y-o-y.

Gross margin improved by 1.3 percentage points, due to reduced clearance stocks, and over the coming months is expected to remain in line with last year’s 1.6 percentage point increase.

Shares dipped 7% to 757.95p on Thursday morning.

Quick facts: Dunelm Group plc

Price: 1148 GBX

LSE:DNLM
Market: LSE
Market Cap: £2.32 billion
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