Dunelm third-quarter revenues up: What the analysts say

“Today’s result confirms that the blip experienced over the second quarter, when sales decelerated, was no cause for concern.

“New management is clearly already proving effective on execution. For next year, management is committed to opening just five new stores. Finding quality space is clearly becoming harder.

“While management believes it has taken market share, to the extent that it is an outperformance remains questionable. Argos reported strong furniture sales throughout January and February while recent results at B&Q, Wickes and Topps Tiles suggest that home-related spend has been robust throughout the period.

“There is a risk that as the business reaches maturity, driving growth may require further investment. We felt each of John Browett’s ‘eight projects’ recently outlined at the interims to drive the three-part growth strategy were sensible measures.

“Such measures include reducing stock densities, while improving shelf availability, service levels and driving growth in the furniture category as well as online. We understand each project to be worth “multi-millions”.

“However it is our understanding that such gains would ultimately be invested back into the business to drive top-line growth. Our fear is that the benefits of any such investment would be marginal.” – Ben Hunt, Haitong Research

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“Dunelm has reported a reasonable set of results for the third quarter. On an actual basis, its like-for-like growth of 1.1% represents a dip versus the strong like-for-like performance seen in both its first half (+4.6%), and indeed for the same period last year (+4.9%).

“However, on an underlying basis – adjusted for the timing of its successful Winter Sale and Easter trading – like-for-likes grew 5.0%, which paints a more positive picture for the retailer.

“Physical expansion remains a key tenet of Dunelm’s growth strategy. However, online continues to grow in prominence for the retailer.

“It is this ecommerce proposition that is especially important for Dunelm in extending its geographical reach, especially to areas of the country such as the Southeast where it remains relatively underserved.” – Greg Bromley, Verdict Retail

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“After weak pre-Christmas footfall damped the second-quarter trading update, Dunelm has bounced back with a much stronger performance over the third quarter.

“It’s still relatively early days for the new management team and Dunelm has hardly struggled to outperform the sector in the past. Nonetheless, while the group has excelled at driving market share and creating a compelling consumer proposition, there is an opportunity to bring in elements of industry best practice to both improve efficiency and drive sales.

“Warehouse expansion and systems changes makes this the most inefficient year before Dunelm can start to leverage the significant benefits of a single stock file and single site operation.

“From a low point of just two new store openings in the second half of the current financial year, Dunelm is starting to build out its pipeline of new sites, with five out of an intended 10 sites signed up for next year.” – John Stevenson, Peel Hunt