Sitting pretty... Dunelmhomes in on websales
WHAT do footballer Gary Lineker and homeware giant Dunelm have in common? They both owe part of their success to Leicester Market, where Lineker’s Dad sold fruit and vegetables and a man called Bill Adderley took a chance on trading cut-price curtains rejected by M&S after his job managing a Woolworths store was forcibly relocated to Skegness.
You might never have heard of the Adderleys, but the business that Bill and his wife Jean built from their stall is now worth far more than any footballer, with a market capitalisation of almost £3billion.
That’s a lot of curtains. But the company, which was floated on the stock exchange in 2006, has expanded far beyond soft furnishings. There’s not an M&S second in sight at its out-of-town stores or on its popular website. Instead customers are snapping up velvet cocktail chairs at £99 and coloured bath racks for a tenner.
It would be fair to say the firm has had a good pandemic. Not only had it launched a strong e-commerce strategy before we were all locked in our homes, but it quickly moved to offer click & collect when stores could not open, and its out-of-town retail parks meant there was space for social distancing once in-person shopping restarted.
This week’s full-year figures showed just how much lockdown has brought out our inner interior designers. Stores were closed for a third of the year, but sales at Dunelm were up 26 per cent, while profits rose over 44 per cent for the year. Along with an ordinary dividend of 35p for the year) the company put in a special dividend of 65p for its shareholders, after no dividend at all last year.
Nick Wilkinson, the chief executive, says the business is now ‘digital first’, which is a far cry from a stall at Leicester Market. His results statement focused on the business’s social purpose, with a pledge to reduce emissions by 50 per cent by 2030 and repayment of the Government’s furlough money despite operating its own ‘furlough scheme’ and paying all colleagues a thank-you bonus.
Even though comparators against last year’s sales are tough, Wilkinson says that sales are better than anticipated, and that next year’s profits will be ahead of expectations. He acknowledges that there are some clouds on the horizon, however, notably the supply chain issues that have dogged all retailers due to Brexit and the current HGV driver shortage, as well as the rising costs of raw materials.
Analysts welcomed the figures. Richard Taylor, at Barclays remains Overweight on the stock and slightly increased his forecasts, to £178 million of pre-tax profit for next year. While noting the strides that the company has made, he believes that more targeted online marketing could increase market share further. He says: ‘For all the improvements in the digital offering, it is clear to us there is much more to come.’ Peel
Hunt has a target price of £17.50 on the stock, currently at £15.15, with analyst John Stevenson citing the fact that the business still has low market share in categories such as furniture, giving it opportunities to grow.
It’s all good news for investors, including the Adderley family, members of which still own 43 per cent of the stock. Billionaire Bill is now retired, but son Sir Will Adderley (who has been chief executive twice) remains on the Dunelm board despite selling some of his stake earlier this year.
As Midlands success stories go, Dunelm remains a phenomenon with even more longevity than Gary Lineker.
You have to wonder what they put in the water at Leicester Market – whatever it is, it’s worth taking a drink.
Traded on: Main market Ticker: DNLM Contact: dunelm.com or 0116 264 4400