Dunelm shares rocketed in early trading today after it predicted higher full year profits thanks in part to a good customer response to a crucial new website.
The furnishings retailer said it maintained strong sales growth online and in stores during a “critical” transition to a new website platform that it hopes will improve its retail proposition.
Gross margins were also stronger than expected thanks to “better sell-through” and sourcing gains, while operational costs are in line with expectations.
“In light of the above, the board now anticipates that the full year profit before tax will be higher than our previous expectations, assuming no significant change in consumer demand as a result of the outcome of the general election,” Dunelm said in today’s trading update.
Investors reacted by sending Dunelm’s share price up 17.5 per cent to 977.5p.
It marks a sharp contrast to an October trading update that soured the company’s share price, after it warned of lacklustre sales and said a weak pound could hurt profit margins.
“A lot can happen in two months in the world of retail and in Dunelm’s case the winds have changed in its favour,” AJ Bell investment director Russ Mould said.
He said customers’ warm response to Dunelm’s new website was crucial to today’s update.
“That’s going to be a huge relief to the company as there is always a fear that new IT projects won’t work properly on initial deployment,” Mould said.
Peel Hunt added: “The website is what we can only describe as lightning quick, with better search functionality, an improved customer experience, click and collect capability and provides the basis for significant future development and innovation.”
“Also in its favour is an improvement in margin, which has to be commended given how the general direction of travel for retailers is margin compression in a world of heavy discounting,” Mould also said.
However, uncertainty over the General Election has tempered Dunelm’s predictions, he added.
“No-one knows how the general election result will impact consumer spending patterns and so the company has understandably avoided giving too bullish a comment about its outlook.”