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Retailer Dunelm's sales rise on Worldstores acquisition
July 7, 2017 / 7:11 AM / 4 months ago

Retailer Dunelm's sales rise on Worldstores acquisition

(Reuters) - British homewares retailer Dunelm Group Plc reported a 17.7 percent jump in fourth-quarter revenue as acquisition of Worldstores and better online and home delivery sales more than offset dull Easter sales.

Shares in Dunelm rose as much as 6.2 percent on Friday, topping the FTSE midcap index after the company said its revenue rose to 240 million pounds ($310.94 million) for the 13 weeks ended July 1.

Robust growth in consumer spending has been one of the main factors sustaining Britain’s economy since the Brexit vote last June. However, retailers fear spending will fall as inflation erodes real earnings growth.

Dunelm, which sells cushions, bedding and kitchen equipment, said revenue growth was partly driven by its acquisition of WS Group, which owns the Worldstores, Kiddicare and Achica brands, in November for 8.5 million pounds.

The company, which generates 20 percent of its sales online, saw an improvement in online and home delivery sales on the back of its launch of Worldstores products on the Dunelm website.

Worldstores contributed 22.6 million pounds, or 9.4 percent of revenue, to Dunelm in the fourth quarter.

Like-for-like sales rose 3.8 percent in the fourth quarter, while home delivery sales rose 32.1 percent, Dunelm said.

Sales over the Easter period were 7 percent lower than a year ago, it said.

The company had warned earlier this year that it would increase prices on a number of products to offset the impact of a weak pound.

“We maintain the view that a consumer squeeze on disposable income will impact the homewares industry and Dunelm,” analysts at Jefferies said in a note on Friday.

Dunelm said it expected full-year pretax profit, excluding acquisition charges, of 109 million pounds to 111 million pounds, lower than the 128.9 million pounds reported a year earlier.

Dunelm’s gross margins, excluding Worldstores, fell by about 75 basis points as the company gave more discounts on some of its end of season stock. It expects full-year gross margin to be broadly flat from last year at about 49 percent.

Dunelm’s shares have fallen 21 percent in the past 12 months, compared with a 22 percent rise in the FTSE midcap index.

Reporting By Justin George Varghese; Editing by Sunil Nair and Gopakumar Warrier

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