Dunelm takes home strong festive sales but visibility remains low

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Dunelm Group plc (LON:DNLM) set out half-year profit forecasts after sales surged in the festive period, though it is not clear when it will be able to reopen stores again.

The retailer expects profit before tax for the first half of the financial year to be around £112mln, from £83mln last year, including the repayment of the £14.5mln accessed under the government’s furlough scheme.

READ: Dunelm surprised by new lockdown rules on homewares retailers

However, the homewares firm did not provide guidance for the full year because there is a lack of clarity on when the restrictions will be lifted. 

The Click & Collect and Home Delivery services are expected to continue to be permitted, though Dunelm still expects to make a modest weekly loss given its fixed cost base and the decision not to access more furlough money from the government, since it has introduced a company-funded ‘furlough’ equivalent scheme.

In the 13 weeks to December 26, the group’s second quarter, sales advanced 12% to £360mln, with digital sales accounting for 40% of the total compared to only 21% a year ago.

As a result, half-year sales rose 23% to £719mln with digital making up 35% of the total.

Net cash at period-end was £141mln, with access to £175mln of approved banking facilities.

Most of the store estate was closed for a four-week period during November, Welsh stores were closed for a 16-day period from mid-October and many stores were again impacted by further regional restrictions implemented towards the end of December.

All 174 stores are currently closed, with all but five still able to operate a Covid-secure and contactless Click & Collect service, while Home Delivery services continue to operate as normal.

Analysts at Peel Hunt downgraded full-year profit before tax expectations by £40mln from £120mln, though it noted that the FTSE 250 firm has accelerated its market standing over the past year.

“Confidence levels are high and we expect Dunelm to bounce back from the latest lockdown with no impact on our expectations for financial year 2022 and beyond,” the house broker commented.

Shares dropped 7% to 1,210p on Thursday at the opening bell.

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