About the Company
United Kingdom-based Dunelm Group Plc is a general retailer company and operates in the UK's homeware market. Dunelm and Dorma are the key brands of the company. Dunelm Plc has around 170 stores and total headcount of around 9,000 workforces. The company offers products like furniture, curtains, blinds, bedding, rugs and decors through its platform and facilitates multichannel convenience through the online, mobile, catalogue, and telephone orders.

Key Statistics


Key Institutional Investors in Dunelm Plc
Royal London Asset Management Ltd., Standard Life Investments Ltd., Aberforth Partners LLP and AXA Investment Managers UK Ltd. are the top institutional investors in the Dunelm Group Plc and all of them having a stake of more than 4 per cent in Dunelm Plc.
(Source: Thomson Reuters)

Trading Updates for the third quarter ended March 30, 2019
On a like-for-like basis, revenue for the third quarter improved by 12.5% to £264.6 mn, on account of substantial like-for-like store revenue surged by 9.8% to £225.9 mnand LFL online revenue reported stellar growth of 32.1% to £38.7 mn. Gross marginfor the third quarter improved by 90 bps as compared with the corresponding period of the previous financial year. The surge was mainly driven by the favourable impact of the closing of the dilutive Worldstores businesses and an increase in the core business margin by 40bps, driven by improved sourcing. As on March 30, 2019, the group's net debt stood at £48.3 mn against £123.8 mn reported last year.

Financial Performance – H1 FY19 (26 weeks ended as on December 29, 2018)

Source: Company filings, LSE

For the 26-weeks ended as on December 29, 2018, the group’s revenue improved marginally by 1.2% to £551.8 mn as compared with the revenue of £545.4 mn during the corresponding period of the previous financial year. However, on Like-for-like basis, the company achieved good revenue growth in the first half of the FY19 and was up by 6.9%. Dunelm continued to win market share in the Homewares arena in the UK.
For the half-year ended, gross margin of the general retailer surged by 170 bps, primarily because of the improvement in sourcing, hedging gains, the abolishment of Worldstores product lines, and superior end of season stock management.
Profit before tax during the first-half surged by 16.7 per cent to £70.0 mnas compared with £60 mn (before exceptional items) during the first half of the FY18. Impairment cost on intangible items stood at £3.8 mn.
During FY18, Dunelm same-store sales improved by 1%, which was significantly below the industry median of 3%, as per Thomson Reuters.

Stock Performance – 1 Year

Daily Price Chart (as on April 24, 2019), before the market closed. (Source: Thomson Reuters)

At the time of writing (as on April 24, 2019, at 01:48 PM GMT, before the market closed), shares of the Dunelm Plc were quoting at GBX 864.0 and reduced by 3.0 points or 0.34% against the previous day closing price. During the past one-year, stocks have registered a52w high of GBX 920, and a 52w low of GBX 460.0 and at the current market price, as quoted in the price chart, shares were trading 87.8% above the 52w low price level. In last one-year, shares of Dunelm Plc have delivered a price return of 50%.
At the current market price, the dividend yield of the Dunelm Plc stood at 3.11%. The Outstanding market capitalisation of the company stood at £1.76bn.

Dunelm’s Key Risks
The group is exposed to a variety of risks and uncertainties which could have a material dent on the general retailer's performance. Some of them are as follows:

1. Brexit: Over the past six quarters, the group had identified potential uncertainties that could take place in the wake of Brexit, although Dunelm imports less than 1% of its goods from European Union but identified some risk at "deep-sea" ports arising from the Brexit. Around 2.5% to total employee strength at Dunelm are from EU bloc, and they can face some passport issues post Brexit.
2. Depreciation in Sterling Pound: Like other retailers operating within the UK, Dunelm is also exposed to any negative impact of Brexit on the sterling pound and consumer confidence.
3. Competitive offers:The group could experience a plunge in the market share, on account of intense competitive offers in the homewares market.

Conclusion
We anticipate that Britain consumer environment is uncertain, and consumers have reduced spending on the big-ticket items, as per the latest retail sales data revealed last month. The group’s performance has historically been synched with levels of a housing transaction, which is also witnessing a decline. We anticipate a higher risk than historically to a softer market outlook. However, recent performance has been very solid, with LFL growth supported by new ranges and up-weighted marketing spend.Based on the above rationale, we have given a “WATCH” recommendation on the Dunelm Plc at the current price as quoted above in the price chart of GBX 864 (as on April 24, 2019, at 01:48 PM GMT, before the market closed).

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