Thursday, 7 July 2011

Update: Dunelm Group "Simply Value for Money"

Dunelm Group @ 440.2p, +34.7p (+8.56%) as at 11.53am

I note a decent gain on Dunelm Group today following its Interim Management Statement ( Dunelm returns to sales growth)
The home ware and soft furnishings retailer reported that like for like sales in the last quarter have returned to growth by 1.9% (-1.3% previous period). Like for like being a reference to stores open for this period and the previous one so it serves as a measure of existing store performance as it excludes new store openings with their razzmatazz promotion and new customer curiosity.
Total sales for the period, including new stores, have actually grown by 11% to £123.8m.

The Chief Executive, Nick Warton, spoke positively despite the challenging trading conditions as he reported:
- like for like growth of 1.9%,
- a 1.2% increase in margins despite raw matetial increases,
- probable market share gains given the group's above average position relative to the British Retail Council's home textiles index (a measure of company revenues against the total market for textiles),
- future growth potential from the new store openings.

With satisfactory trading and a focus on costs the board also anticipates profit for the year to be in line with current expectations.

I gave the company a once over back in February (Dunelm Group) and not too much has changed in its prospects for me. Like most of the economy it has had a couple of quarters of flattish/negative growth but the company's embedded qualities and prospects appear to be intact.
Still largely family owned with family values, there is a strong focus on costs (the company is debt free), with profitability and shareholder returns being key outcomes.
The opportunity for growth through store openings is substantial and as long as the "family" don't take their eyes of the performance of existing stores, and are able to maintain loyalty, then growth on a like for like basis and through new stores seems certain.
On that basis the potential for long term dividend growth also seems substantial.
The share price has bounced around a bit since February moving from below 400p to 480p and back again before todays statement.
Still one thats worth tucking away for steady growing income then.

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