Dunelm Group has provided an update on its current trading performance and financial position for the year to 27 June 2020.
Dunelm closed both stores and online on 24 March and over the last three months have gradually re-opened all of its operations in a phased and controlled manner. The company expects to open its Pausa cafés towards the end of July.
“We restarted and gradually scaled up our online operations from the end of March and when our stores moved from ‘non-essential’ to ‘permitted’ status under Government rules in mid-May, we began a phased reopening programme,” explains Nick Wilkinson, Dunelm’s chief executive officer. “Most of our stores were open by the end of May and all 173 were open by 22 June.
“During this period, we have benefited from the investment we made in our new digital platform, enabling significant online growth and allowing us to introduce new ways of serving our customers such as virtual Made to Measure consultations and a ‘dark store’ contactless click and collect offer.”
As previously reported, total sales for the 10 weeks to 7 March grew by 7.9%. Total sales for the last 16 weeks (from 8 March to 27 June) declined by 29.0%, with store like for like (“LFL”) sales down 49.7% and online growth of 85.2%.
“We have been operating our digital fulfilment channels at record volume levels,” noted Wilkinson. “Home delivery fulfilment from our central distribution facility exceeded previous record levels in every week since April, and our supplier partners have increased their ‘direct to customer’ fulfilment capacities (running at 4x pre-crisis levels) to meet increased demand. However, due to high demand, online availability, delivery lead times and service levels have been under pressure.
“Since the stores have fully opened, online home delivery sales have been 30% and click and collect have been 12% of the total sales mix respectively. As customers become more comfortable with the physical shopping experience under social distancing rules, we may see this digital proportion reduce, but it is difficult to predict future trends at this point in time.
“We have been pleased with the strong customer response since re-opening,” said Wilkinson. “Whilst the homewares market has proven to be relatively resilient, we continue to take a cautious view of the short to medium term outlook given the ongoing uncertainty around Covid-19.
“We will monitor consumer trends over the summer and, where possible, provide further guidance for FY21 at our full year results in September.”
In addition to demand uncertainty, FY21 will be impacted by cost headwinds directly related to the impact of the virus. Social distancing measures within the operating models of both stores and distribution have led to higher costs to operate for the short-term; in total, the company estimates these costs to be around£150,000 per week.
“We expect that technology costs in the FY21 P&L will increase by around £8m, as we continue to invest in our digital capabilities and no longer capitalise these costs on the balance sheet, as previously announced. We will also be investing in supply chain capacity to meet the high growth ambition for our home delivery channels.
“We continue to develop our strategy of being a “customer first, digitally enabled business”, taking into account all we are learning about our customers and operations during the pandemic. This has clarified our investment priorities and has led to a re-focus of our support centre functions, to ensure we maximise the opportunities ahead. We will provide more detail on these initiatives at the results in September.
Comment from Nick Wilkinson, Dunelm’s chief executive officer:
“We are incredibly proud of how our team and committed supplier partners have responded during the pandemic and of what we have achieved together. Our colleagues have demonstrated exceptional commitment, agility and resilience to adapt our proposition and operations and I would personally like to thank them all.
“The decisions we have made over the last few months have been guided by our principles and values and we are emerging from this unprecedented period as a stronger business. This has given us the confidence to accelerate our digital transition and introduce new ways of serving our customers. There is lots more to do and we are energised to evolve our customer proposition and operations at pace, as we continue to navigate an uncertain external environment.”