Dunelm Reports Resilient Half-Year Results Amid Challenging Retail Environment
Why we think this is good
Dunelm has demonstrated resilience in a challenging retail environment, delivering modest sales growth of 2.4% and an improved gross margin. The company's market share increased by 30 basis points to 7.8%, and digital sales now account for 39% of total sales, up 3 percentage points. Strong cash generation and a maintained full-year outlook further support the positive sentiment. However, a slight increase in the operating costs to sales ratio and acknowledgment of ongoing market challenges temper the enthusiasm, preventing a very good rating.
Key Points
- Total sales up 2.4% to £893.7m
- Gross margin improved by 10bps to 52.8%
- Digital sales now 39% of total sales, up 3ppts
- Market share increased to 7.8%, up 30bps
- Profit before tax up 0.2% to £123.2m
- Diluted EPS up 0.9% to 45.0p
- Strong free cash flow of £169m
- Net cash position of £57.1m
- Interim dividend of 16.5p and special dividend of 35.0p declared
- Full-year profit expectations maintained, in line with consensus
Summary
Dunelm Group plc has released its interim results for the 26 weeks ended 28 December 2024, showing resilience in a challenging retail environment. The company reported total sales growth of 2.4% to £893.7m, with digital sales now representing 39% of total sales, up 3 percentage points. Notably, Dunelm achieved a gross margin improvement of 10 basis points to 52.8% and increased its market share to 7.8%, up 30 basis points. The company's profit before tax rose slightly by 0.2% to £123.2m, while diluted earnings per share increased by 0.9% to 45.0p. Dunelm's financial position remains strong, with free cash flow of £169m and a net cash position of £57.1m. The company has declared an interim dividend of 16.5p per share, up 3.1%, and a special dividend of 35.0p per share. Despite the challenging sector backdrop and cautious consumer environment, Dunelm remains confident in its business model and strategic plans, maintaining its full-year profit expectations in line with consensus. Broker targets suggest potential upside, with recent price targets ranging from 1,170p to 1,430p, compared to the current share price of 971.00p.