Sales loss in Q4 will not dampen long-term prospects for Dunelm

Following today’s release of Dunelm Q4 figures for FY2020,

Emily Stella, Lead Retail Analyst at GlobalData, a leading data and analytics company, comments:

‘‘Dunelm’s Q4 results paint a similar picture to other non-essential retailers over the lockdown period: sky-high online sales growth that cannot counterbalance devastated store sales. But, there is one difference, which is that Dunelm has already successfully returned to sales growth and profitability in June. And so, for Dunelm, the last quarter can be viewed as a temporary shock to sales, and one that will not affect the fate of the business. Profits for the year are expected to be lower than last year, between £105m and 110m (versus £125.9m in 2019), but Dunelm’s strong performance earlier in the year will have protected the retailer from worse.

Dunelm reopened stores to the public in mid-May, with all 173 open by 22 June, and this allowed the retailer to swiftly respond to pent-up consumer demand during lockdown. A delayed summer sale also helped bolster sales in June. Operating physical stores and distribution sites with social distancing comes at a cost though: for Dunelm, that is estimated at £150,000 per week. Fewer customers in stores because of social distancing and increased costs to enforce it, make it especially hard for retailers to return to profitability, so Dunelm’s return in June is admirable.

Online, Dunelm met increased demand by ramping up its capabilities; supplier partners increased their ‘direct to customer’ capacities from normal levels four-fold. Consumer appetite to buy online is yet to diminish, with home delivery sales currently c30% of total sales mix (around double what online penetration was before lockdown) and click and collect c12% of total sales. Although, Dunelm expects this digital proportion to reduce as consumers gain confidence to shop in stores.”

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