Dunelm’s ‘market-beating’ potential hailed as shares rocket
Dunelm has been hailed as a “coiled spring” by London broker Peel Hunt amid rising sales and its shares rocketing in recent weeks.
The Leicester-headquartered retailer, which is a member of the FTSE 250 index, a “clear moat” compared to its competitors due to a combination of more products, more active customers and a much better online customer experience, according to Peel Hunt.
The broker added the homewares giant has the potential to post a “materially stronger” performance than current estimates.
The analysis comes after Dunelm posted sales of £462m for its third quarter, a rise of more than six per cent.
Sales at Dunelm have been consistently rising over the past few years, boosted by a focus on personalised, low-cost furniture and home goods.
Shares in the retailer have also been on the rise in recent weeks – jumping from 858p on 7 April to 1,184p. Peel Hunt has given Dunelm a target price of 1,375p.
Dunelm ‘mindful of uncertainty and volatility’
“The group’s three-year forecast assumptions remain very conservative… the prospect of a recovered consumer could challenge forecast assumptions to the upside,” Peel Hunt analysts said.
“Investment and increased capabilities [have placed] it in pole position for eventual consumer recovery,” they added.
Low consumer confidence has been weighing on the retail sector since the beginning of the cost-of-living crisis, although there are signs that consumer sentiment has passed its low.
The sector has also been affected by a jump in costs, a result of higher business rates and higher taxes.
Dunelm has said it has only been able to “partially offset” the inflationary impacts of a new packaging tax and a rise to employer’s National Insurance with productivity initiatives.
“We are mindful of increased levels of uncertainty and volatility in the current environment, and the known labour cost headwinds,” CEO Nick Wilkinson said in April.
“[But] we remain confident in our plans and the strategic progress we are making, and are on track to achieve our milestone of 10 per cent market share in the medium term.”