• Angus Crennan

Dunelm Group Case Study – a modern retail cash generating machine

Dunelm is the UK’s leading home furnishings company and has been around since 1979.

In recent years this business has consistently grown sales, maintained attractive profit margins, enhanced its productivity and grown its earnings. This is an out-of-town superstore business model which works and a modern retail cash generating machine.

The Balmoral Fund purchased Dunelm in July 2017 at GBP 5.62. The business was trading around 14 times its earnings per share with a dividend yield over 4%, a moderate amount of debt and a history of consistent earnings growth. The strategy made sense, the business model worked and the financial statements were straight forward.

Following two further purchases Dunelm became our dominant position in September.

As at 24 October 2017 the stock is up around 21% in GBP terms and around 25% in Australian dollar terms on our average entry price.

I have rarely seen the market re-rate a stock so positively so quickly.

So long as management continues to consistently execute its strategy then this is exactly the sort of business we look to be part owners of as a way to provide for our families over the long term.



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