Dunelm: update on current trading and coronavirus

In light of the rapidly changing developments regarding COVID-19, homeware chain Dunelm has issued the following update (which will replace its third quarter trading statement):

‘We have been working closely with our colleagues to assess the risks that they and our customers were facing from the COVID-19 outbreak across our business and day to day operations. Yesterday (Monday March 23) we had made the decision to close our stores to customers.

‘At that point, we had intended that our stores would continue to offer services to their communities, both as contact-less collection points for Click & Collect orders, and to perform activities which supported local people, such as befriending services and local deliveries to the vulnerable.

‘However, the announcement by the Prime Minister last night has led us to review our approach and we are intending to temporarily close down all of our customer-facing operations today in order to understand and comply with the new restrictions and guidelines.

‘We had already taken significant and decisive actions to support the most vulnerable and lowest paid colleagues in our business, and now we will go further to support the national effort to defeat this pandemic.

‘At the same time, we have also taken actions to protect the cash resources of the business. This includes our decision to cancel the interim dividend, which was due to be paid in April. Our capital policy is unchanged and we remain committed to returning surplus cash to our shareholders. In light of the extraordinary circumstances, the board believes it is important to retain the cash in the business until further certainty is gained.

‘Notwithstanding the latest government guidelines, we remain determined to ensure that we use these challenging times to develop a stronger proposition for our customers which will ensure that when this pandemic is over, we have an even better business.

‘The board has taken immediate actions to protect the cash flows of the business. These actions include reducing capital expenditure and all non-essential operating costs as appropriate.

‘We are in close contact with our suppliers and are managing our stock requirements in light of latest trading information. We are also liaising with our landlords to improve our rent payments schedule. Our board of directors have agreed to either waive their non-executive fees or to take a reduction in their executive pay for the next three months.

‘Additionally, we have taken into account the latest guidance from the government regarding their intentions to support businesses through this crisis. Our cash flows will benefit from the business rates holiday (effective 1 April 2020) and the deferment of VAT and corporation tax payments.

‘We expect to utilise the government Job Retention Scheme to help fund the pay of our colleagues who may no longer be able to work in the business and we are exploring the scheme which provides additional funding options for corporates. The situation is very fluid, and we remain focused on balancing the right actions for both the short and longer-term.’

In a trading update, Dunelm said that for the first 10 weeks of the third quarter (ending March 7 2020), total like-for-like sales were up 6.5%. But it added that over the past two weeks (ending March 21) ‘we have seen a progressively negative impact on our trading as a result of the COVID-19 pandemic’, with total like-for-like sales down 8.8% driven by reduced footfall to our physical stores. Our online business continues to grow and in recent days, as store footfall has fallen further, we have seen a material increase in online demand.

Prior to the recent downturn, Dunelm was performing well and in line with our expectations. However, given the uncertain backdrop, we do not think it is appropriate to give financial guidance for the [current financial year] and beyond.’

Dunelm ceo Nick Wilkinson commented: “These are unprecedented times, but Dunelm is a strong business which has been built over 40 years on the foundations of close relationships with our customers, colleagues, suppliers and shareholders. Our business principle to ‘Do the right thing’ is more important than ever in the current situation.

“We have a very strong team in place who are adaptable and committed to ensuring the long-term success of the business. We are navigating the challenges of this situation, acting in the interests of all our stakeholders, and doing the work necessary to ensure that we come through this crisis in a stronger position and with a better business for the future.”

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