Cantseethewoodsforthetrees
21 Feb 2018
Tempus in the Times says 'Buy'. Furnishing store is still a home winThe Times21 February 20182017 revenue £955.6m 2017 ebitda £142.2mIt is not hard to see why investing in Dunelm might be a tough call for most punters. In the past five years, the share price of the homewares retailer has been extremely volatile, falling from just shy of £10 a share in March 2016 to 578½p yesterday.Dunelm, which began life as a market stall in Leicester in 1979 before listing in 2006, has suffered more than its fair share of management turbulence. John Browett, its chief executive, left abruptly in August after less than two years in the role amid an apparent backlash over his management style. Nick Wharton left similarly suddenly in September 2014.Leadership of the company has been entrusted now to Nick Wilkinson, former boss of Evans Cycles and a former McKinsey management consultant, who started his new job this month. Key to his success will be an ability to get along with the founding Adderley family, who hold more than 50 per cent of Dunelm’s shares. Mr Wilkinson will have to find himself a new chief financial officer, too, after Keith Down said yesterday that he was stepping down for personal reasons.In a retail sector beset with rising costs and inflation, Dunelm, which sells bedding, curtains, furniture and kitchenware, has to cope with a variable housing market and fickle consumer spending. Add in the fact that the group’s acquisition of Worldstores — a lower-margin rival that owns Kiddicare and Achica, two online retailers — is taking longer to integrate than planned and it is clear to see why there may be other retailers that are easier stock picks.That said, there is more than enough to recommend Dunelm as worthy of holding a position in an investor’s portfolio. It remains a highly cash-generative business, with an eye-catching 4.6 per cent yield, and analysts forecast that it will return to special dividend payments by the end of 2019. In time its acquisition of Worldstores will benefit the company, even though the unit’s losses of £5.6 million in the first half are higher than expected and are hurting the gross margin.Dunelm’s takeover of Worldstores was designed in part to accelerate its push into online sales and to improve its technological capabilities. Worldstores listed more than 500,000 home and garden products on its site and was considered to have advanced “back-end” online technology. This should help Dunelm, which has been slower than it should have been in seeking a larger share of the ecommerce sector.The Worldstores acquisition aside, Dunelm’s main business is trading fairly well in a highly challenging market in which bigger rivals, such as Carpetright, are suffering. Interim figures showed that store like-for-like sales were up 3.5 per cent and online sales up by 36.8 per cent. Overall like-for-like sales are up 6 per cent and the group is gaining market share in a homewares market that for most operators is broadly static.Dunelm has 173 stores that are well spread around the UK and it has maintained a good reputation for value and quality in a market that is deeply sensitive to price. Annual sales are approaching £1 billion and the group is hoping to double that in time, with ecommerce accounting for up to 40 per cent of overall sales. It plans to do this by improving the quality and breadth of its range, making its stores better to shop in and easier to navigate, and cutting costs, while driving online sales.The share price — rightly — was hit yesterday by the continued Worldstore losses and integration issues in a tough first half, but this could be a buying opportunity as there is medium-term growth ahead.
IOMINVESTCOM
21 Feb 2018
Barclays downgraded (ShareCast News) - Barclays downgraded its stance home furnishings retailer Dunelm to 'equalweight' from 'overweight' on Wednesday and slashed the price target to 630p from 810p following "disappointing" first-half results and commentary on Worldstores.The bank said pre-tax profit of £60m was 5% below is estimate, while the downgrade to guidance for Worldstores - which is now expected to incur a pre-tax loss of £7m to £8m for the year - is concerning."Although we still believe the acquisition provides Dunelm with a better online platform than it had previously, we think the process of consolidating websites and reaping the benefits of the combined businesses may be slower and more challenging than we had previously anticipated," Barclays said.In addition, it highlighted concerns about store profitability, noting that while core Dunelm's online business has been growing well, in-store like-for-like sales have been less impressive. If this continues, it could hinder operating leverage as several store costs are relatively fixed in the medium term."Ultimately, we recognise the drivers of the story including store roll-out, improved online capabilities and an optically cheap valuation; but we lack confidence on execution in the near term."The bank cut its underlying pre-tax profit estimate for 2018 to £114.5m from £122.2m and its estimate for 2019 to £128.6m from £141m. For 2020, it now sees underlying pre-tax profit of £143.7m from £165.9m.At 1055 GMT, the shares were down 2.3% to 565p.
Thunderbird 6
20 Feb 2018
Re: Half year results I hope you're right !
malj1
20 Feb 2018
Re: Half year results Watch the organ grinder & not the monkeys (aka the hired hands); that means WA.
Callun
20 Feb 2018
Re: Half year results Losing the CEO and then the CFO in short order is bound to unsettle the market. Until we see what the new boys can do there will be a negative weight on the company. The problem with new boys is they usually want to put their own mark on the company, and that often involves undoing what their predecessors did, and that will cost.Looks like DNLM SP will remain in the doldrums for some time.Callun
malj1
20 Feb 2018
Re: Half year results Mr Mkt having a conniption here, as only reading the headline & not the detail. WS on track for breakeven this fy (thereafter I'm only assuming v moderate profit, but all retailers have to have a web arm). Core business solid. Factors depressing margin overwhelmingly one offs & are investment in the growth of the business. DUN seem to be working on an internal plan of ca 300 stores, which is a feasible UK footprint. Still a class act in my view; WA knows his onions & I think is focussed to an end sale to private equity. We shall see!
Callun
20 Feb 2018
Half year results Sales up, profits down.Weakness reported in Worldstore business.Ongoing investment in infrastructure will result in higher operating costs for the full yearAchica sold off.Dividend upCFO leaving in JuneMarket initial reaction strongly negative, with SP down more than 13%.Callun
IOMINVESTCOM
12 Feb 2018
Dunelm plc: Barclays reiterates overweight with a target price of 810p. Dunelm plc: Barclays reiterates overweight with a target price of 810p.
jaymac3
05 Feb 2018
Re: a customer perspective I believe it was more likely the change- over period from sales goods to arrival of new spring/ summer in that particular store as the local one near me is working night shifts to get everything rearranged as the sales have ended and new stock is arriving in big quantities. Takes some effort in a store like DNLM with thousands of items to be checked while setting up new seasons goods. It will be interesting to read the results on 13th March. Jaymac3
malj1
24 Jan 2018
Re: a customer perspective Post end of Xmas sale re-price?
kryptes
23 Jan 2018
a customer perspective I'm always wary of 'anecdotal evidence' as one can read way too much into one data point but I visited one of the larger Dunelm stores today and could immediately see why sales are not as good as they should be: much of the merchandise is not priced. So, for example, a whole range of pans on display (looked rather nice and I was tempted to buy a set) not one had any price indication. the tills I was looking at some items but could not see a price on about half of them and a lady next to me turned around and said "there's no prices on any of this is there?". As I was leaving I stopped to look at some suitcases - none of which had a price label. As I searched through about 8 tags (none had a price on) a security guard stepped in and said "This one is £x and these are £y". Good for him and he should get a bonus a raise or a promotion. But how about the manager getting his or her staff together and saying "Let's go through this store and make sure every single product is priced up"?It's what's called retail detail and from what I saw today Dunelm are not good at it, which comes down to management and training.p.s. oh and the lady on the till tried to charge me £40 for an item which did have a nice clear price label on it - but it said £32. Not impressed.
Callun
18 Jan 2018
Re: Worldstores I am not familiar with the Trustpilot website so I checked out a few other well known brands on it. Many are voted worse than Worldstores. Perhaps the site is used more by disgruntled customers than satisfied ones. If the statistical sample is biased then the results are questionable. That said, Dunelm comes out very well.To argue that the fall in shares is attributable to the trustpilot survey is, in my opinion, weak, since there has been no noticeable deterioration in the comments; they were receiving bad ones at the start of the survey in 2009.Callun
IB Investor
17 Jan 2018
Re: Worldstores This doen't look good - I was surprised that the erosion in margins has had such a dramatic effect on the shares - can this not happen when you start to compete on price on the web?
Tenobas
17 Jan 2018
Worldstores Hello,I am not so sure that this retrenchment is about margins but I think it is this:[link]
malj1
16 Jan 2018
Re: IMS Class act. Can't fault this. Strong headline t/o growth. Clearly dominating the market sector (ie better than John Lewis). Margin dilution essentially a handful of one offs as largely integration of WS acquisition + aggressive rollout leads to a series of step changes in investment. These will unwind h2 & along with a lull in rollout will lead to a significant recovery in margin & especially cash generation. Key issue is the potential store footprint. Original target 200 st looks light to me in context of UK retail. Is it 250 st as the previous CEO commented? If it's split the diff, say 225 st, which I think it's quite feasible, then DUN looks outrageous to me, with an exit to private equity ca 5 years down the road.Been in this one since more or less the get go & I think I'll be around quite a while yet. As ever more or less ignored by the city (?!), which will throw up buying opportunities.
