Dunelm is the UK's leading specialist out of town homewares retailer, operating in the 12bn homewares market. The Group currently operates 161 stores, branded Dunelm Mill, of which 157 are out-of-town superstores and 4 are high street shops. The majority of the stores are located in the Midlands or north-west of England. Dunelm employs over 5,000 full and part time staff, the vast majority of whom work in the stores.

Dunelm was founded in 1979 as a market stall business, selling ready-made curtains. The first shop was opened in Leicester in 1984 and over the following years the business developed into a successful chain of high street shops in the Midlands specialising in soft furnishings. The first Dunelm superstore was opened in 1991, leading to the Group's expansion into the broader homewares market.

The superstores provide an average of 28,000 sq ft of selling space and offer an extensive range of around 20,000 products across a broad spectrum of categories, including bedding, curtains, gifts and seasonal items, cushions, bathroom products, kitchenware, quilts, pillows and rugs. Dunelm also specialises in offering a wide range of fabrics, made to measure curtains and a frequently changing series of special buys. The directors are passionate about ensuring that all ranges live up to Dunelm's philosophy of offering customers "Simply Value for Money".

Dunelm also operates an on-line store, to be found at www.dunelm-mill.com.

Dunelm listed on the London Stock Exchange in October 2006 (DNLM.L) and has a current market capitalisation of approximately 750 million

Dunelm like-for-like sales up

StockMarketWire.com

Dunelm Group's total revenue for the fourth quarter rose by 17.7% to £240.0m.

Total revenue, excluding Worldstores, rose by 6.7% to £217.4m and total like-for-like growth (combining LFL stores and home selivery) grew by 3.8%.

Chief executive John Browett said: "The Worldstores acquisition will provide a massive leap forward to our online and store offer that we think our customers will love.

"The integration is going well and we are confident in the benefits it will generate. With around 20% of our sales now generated online, we believe that we have arrived as a significant e-commerce player in homewares.

"We've seen a good quarter of trade with positive like-for-like sales growth and a very strong online performance. Encouragingly, we continue to take market share.

"We continue to invest in the business for the longer term to improve our customer proposition and infrastructure and, despite an uncertain consumer environment, we go into the next financial year with some good momentum."

Intraday SP reached 636.25p

Jefferies - "Dunelm bought twice as much seasonal stock (e.g. electric fans, garden and BBQ related items) which led to seasonal sales + 70% and helped to offset the negative impact of a late Easter"

Ian Pierce - Fool.com

Domestic retailers of all stripes have fallen out of favour with many investors in recent months, but for contrarian investors this fear has created what appears to me to be a slew of bargains accross the FTSE 250. One of the glaring is big box home furnishings retailor Dunelm, whose shares trade at just 13.5 times forward earnings while offering a dividend yield that was over 9% last year.

And while Dunelm has had its rough patches in recent quarters, a 2.2% year-on-year decline in in like-for-like sales in Q3 caused a big sell-off, the company's dividend is well covered by earnings, debt levels are low and the company has surprisingly solid growth prospects.

On the dividend front, the company paid out 25.1p in ordinary dividends last year and threw in an additional 31.5p special payout at year-end thanks to surplus cash balances. We won't know until early September what level of special distribution will be made this year but the fact that pre-exceptional profits this year are expected to be around £110m, or £18m less than last year, does suggest a smaller payout. That said, last year's ordinary dividend alone represents a solid 4% yield, so there's little reason to panic if the special dividend is slightly lower.

And unlike many large retailers, Dunelm isn't swimming in debt. Management targets a net debt level between 0.25 and 0.75 times EBITDA, which provides plenty of freedom to spend the majority of free cash flow on store expansion and shareholder returns without threatening the health of the business.

Store expansion is one way the company is growing, but management isn't solely relying on new stores to boost growth. In fact, a renewed focus on online sales and sprucing-up stores led to LFL sales rising 3.8% in Q4. This along with profitability and free cash flow metrics, becomes more impressive once the newly -aquired Worldstores brand that management is revitalising is stripped out.

All told, with it's shares cheap, good growth prospects and a huge dividend yield on offer Dunelm is one income share I'd keep my eye on.