Homewares retail chain Dunelm has revealed it was one of the big winners on the high street last year – defying the gloom, tightening costs and boosting profits.
As a result of a 19.4% boost in pre-tax profits for the six months to December 28 to £84.9 million, bosses said they expect full-year profits to beat analysts’ expectations.
Revenues rose 6% during the period, to £585 million.
The company said the boost came thanks to not taking part in Black Friday or any other pre-Christmas promotions, along with cutting back costs.
A new website rolled out in October also helped, as did adding tablets to allow customers to order in store.
The third quarter has started well, with a successful winter sale across the total retail system. As a result, we expect FY20 profit before tax to be slightly ahead of the top of the latest range of analyst expectationsNick Wilkinson, Dunelm
Chief executive Nick Wilkinson said: “The third quarter has started well, with a successful winter sale across the total retail system. As a result, we expect FY20 profit before tax to be slightly ahead of the top of the latest range of analyst expectations.”
There have been fears that the coronavirus outbreak, officially named Covid-19 by the World Health Organisation, could slow down production in China, where factories are closing or cutting back production.
But Mr Wilkinson said: “We are monitoring the coronavirus outbreak carefully. To date we have not assumed any material disruption to our supply chain or any financial impact in the year.
He added: “We’re monitoring it every day but, because of the nature of homewares, we don’t expect significant disruption.
“We don’t have an office or shops in China. We stopped travelling there at the earliest opportunity and stopped visitors from there.
“About 20% of our supply is direct and China is a significant proportion of that. But we have several months of stock in our system and, because the issues happened around Chinese New Year, we were already prepared for a slowdown.”
In the year ahead, Mr Wilkinson said he plans to open two or three new superstores and will shortly trial a small 5,000 square foot site on a high street.
“This store opening is a low-cost test to understand how our customers react to a smaller, edited range in a location chosen to increase our reach,” he said.
Online-only products will also grow, with 6,000 lines added this year, he added.
We’ve always been a product company and understand affordability is key to our customers. We’re not trying to persuade our customers they’re on a path to luxuryNick Wilkinson, Dunelm
The homewares market has suffered in recent months, dropping 1.4% in the first half of the financial year. But Dunelm said it grew 2.3% during the period – an indication that it is winning customers from rivals.
Asked if he had any concerns over Dame Sharon White joining struggling rival John Lewis Partnership, Mr Wilkinson declined to comment, saying he is focusing on Dunelm rather than its competitors.
A key area for growth will come through brand recognition, he added, saying the company’s sponsorship of ITV’s This Morning had proved successful and would continue through the sponsorship of Channel 4’s First Dates series.
He also revealed that focus will continue to be on a wide range of products at various price points.
“We’ve always been a product company and understand affordability is key to our customers. We’re not trying to persuade our customers they’re on a path to luxury,” he said.