Homewares specialist Dunelm – which bought etailer Worldstores last November – reported better than expected sales in the fourth quarter, but downgraded profit expectations.
Here is how the City reacted.
Scott Ransley, Stifel
“Dunelm produced a resilient quarter-four performance (+3.8% like-for-like) in a volatile retail market at a time when the business has been undergoing significant change and investment.
“Management’s changes have enhanced the group’s ecommerce credentials (online penetration now c20%).
“Gross margin (mix, clearance) offsets the sales beat, resulting in a small reduction in pre-tax profit guidance (less than feared) but the business looks in good shape for peak 2017 and beyond.”
John Stevenson, Peel Hunt
“As well as final results, the management team is holding a capital markets day in October, which is likely to be a catalyst for a better understanding of the Worldstores benefit.
“As 2018 full-year forecasts start to look more realistic, we see the autumn events as the likely catalyst for increasing levels of investor confidence as the market gains greater insight into how Worldstores is helping to transform Dunelm’s online credentials.”
Mark Photiades, Cantor Fitzgerald
“Today’s quarter-four update highlights a sales shortfall compared to expectations and a downgrade to full-year pre-tax profit expectations.
“Whilst the downgrade is disappointing, we believe full-year ’17 should be viewed as a year of transition reflecting necessary investment for future growth before a return to earnings growth in full-year ’18 and ’19”
Mark Photiades, Cantor Fitzgerald
“Whilst the downgrade is disappointing, we believe full-year ’17 should be viewed as a year of transition reflecting necessary investment for future growth before a return to earnings growth in full-year ’18 and ’19.
“Risks include further weakness in sterling relative to the dollar and the euro, additional pressure on disposable incomes, Worldstores integration issues, unseasonal weather, competitor expansion and the unexpected departure of key management and senior personnel.”
Nick Bubb, independent analyst
“Today’s quarter-four update from Dunelm for the 13 weeks to July 1 reads quite well, but ends by saying that pre-exceptional profit before tax for the year is expected to be £109m to £111m, down from £129m in the year before… and exceptional costs related to the Worldstores acquisition will be as much as £17m.
“Like-for-like sales in quarter four were up by 3.8%, despite a poor Easter, helped by strong online growth, although gross margins were down by 75bps.”
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