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Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
It is not new news that the retail backdrop is challenging but the last time I mentioned homewares and related company Dunelm (DNLM) I confirmed that despite my continued inability to buy anything from one of its emporiums, I was loving the shares up.
At least from the perspective of the last couple of months, that was a profitable call. Today's full year numbers were no great surprises either with 'challenging' trading conditions, a search for 'opportunities' in the digital world but - as has been a custom with this group - good cashflow, a nudge up of the 5% dividend yield and a workable investment story.
I've talked before about the retail space and how amongst all the crud, there are some overlooked sensible stories that blend market share, good resonance with their underlying customers and a sensible balance sheet that allows the progressive payment of an attractive dividend. Due to the macro backdrop, valuations and sentiment are both shot...but you can still find things to do.
Dunelm fits this category. I might gag at its own strapline of the 'Home of Homes' but any company whose physical retail store network punched out a full year 1% like-for-like sales increase is doing something right. Online growth was over 30% but I can see how the troublesome Worldstores might help take it to higher highs here. Debt remains less than one times ebitda and a continuation of paying out much of the free cashflow looks doable. Thematically, spending a little bit on home furnishings rather than moving home seems much more aligned with the reality out there.
Management are hugely important in any tricky backdrop. I think the Chairman is not the easiest to work with but he is much more than a survivor....and the scope for the share price to squeeze to six quid and more for me is clear. At a quid a share above here, I might even 'reinvest' some of the profits in a set of frilly curtains. As you see I am living the high life...
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