Dunelm surprised by new lockdown rules on homewares retailers

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Dunelm Group plc (LON:DNLM) said the new COVID-19 restrictions are both “unexpected and inconsistent” with the guidance provided during the previous national lockdown.

The retailer is not allowed to keep its stores open this time around because the homewares category is not on the list of permitted businesses.

READ: Dunelm boasts better than expected trading in first quarter

As a result, from today until December 2, Dunelm’s 145 stores in England will continue to operate Click and Collect services but otherwise be closed to customers.

The nine sites in Wales, which have been closed during the ‘firebreak’ lockdown period, are expected to reopen on November 9, while shops in Scotland and Northern Ireland continue to operate normally.

Online home delivery will continue to operate across the country with increased capability thanks to recent investments.

The FTSE 250 firm said these new restrictions have made the outlook more uncertain but it remains confident in its adaptability.

Since the quarterly update in mid-October the cushions, towels, linen and cutlery specialist continued to perform “very strongly” in-store and online, across all product categories with total sales continuing to grow in line with the first quarter.

As of October 31 it had £156mln of net cash and access to £175mln of bank financing facilities.

“There’s clearly a short-term risk to second-quarter numbers but given the massive acceleration in new active customers, Dunelm looks well set for 2021,” analysts at house broker Peel Hunt commented.

“Growth in home-related spending remains a key sector trend, which we expect to continue well into 2021. Within this, Dunelm continues to take market share and build its active customer base.”

“This is the crux of the investment case; Dunelm’s market share (sub 10%) offers significant potential, as illustrated by the rising level of active customers and the disruption of competitors. The net result is a business delivering growth across all channels, generating top quartile sector returns and high levels of cash generation.”

Shares added 1% to 1,409p on Thursday morning.

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