UK homewares retailer Dunelm Group plc (LON:DNLM) shares gained as it delivered fourth quarter revenue growth, boosted by its acquisition of Worldstores.
Revenue in the 13 weeks to 1 July came to £240.0mln, a 17.7% increase on the same period a year ago, including a £22.5mln sales contribution from Worldstores.
Excluding Worldstores, revenue increased 6.7% to £217.4mln.
Shares jumped 4.52% to 624.0p in morning trading.
Total like-for-like sales increased 3.8% to £199.7mln, as home delivery sales jumped 32.1% and store sales rose 1.3%.
Dunelm struggled off weak sales over the Easter period, which were 7.0% lower than anticipated and had a 1.7% adverse impact on like-for-like sales.
Gross margins, excluding Worldstores, also fell by about 75 basis points as the group discounted its end of season stock.
Chief executive, John Browett, said the integration of Worldstores was “going well” and its performance continues to improve in line with expectations.
Dunelm announced it was buying WS Group, which owns the Worldstores, Kiddicare and Achica brands, in November for £8.5mln when the business was close to collapse.
Full year profit to fall as Dunelm incorporates Worldstores
However, the group expects to incur exceptional items related to the acquisition of about £17mln for the full year, representing a £11mln cash outflow. A further £7mln of exceptional items is expected in the next financial year, of which £4mln will be a cash outflow.
Dunelm has guided towards a pre-exceptional profit before tax range of £109.0mln to £111.0mln for the full year to 1 July, compared to £128.9mln the previous year.
Like-for-like sales in the full year fell 0.5% to £834.8mln, as a 2.4% decline in store sales offset a 23.5% increase in home delivery sales.
Total annual revenue, including a 31-week contribution from Worldstores, gained 8.5% to £955.6mln. Excluding Worldstores, revenue edged up 2.3% to £901.1mln.
Conditions remain tough for Dunelm, says Hargreaves Lansdown
George Salmon, equity analyst at Hargreaves Lansdown, said while sales closed the year “strongly” lower margins mean higher sales won’t translate to a better bottom line.
“In fact, pre-tax profits are now set to come in slightly lower than had been anticipated,” he said.
“While it is good to see the integration of Worldstores progressing well, all things considered conditions remain tough for Dunelm just now.
“We’ve already had a damaging profit warning from DFS, and the fact that wage growth is now lagging inflation will surely add to concerns around the sector.”