Dunelm store ©Mutney
Dunelm (LSE:DNLM) shares rose on Thursday after Deutsche Bank upgraded the homewares retailer to “buy” from “hold” and increased its price target ahead of the company’s September 8 strategy update.
The shares were up 3.58% at 861.78 pence at around 08:57 BST, compared with a more modest increase for the FTSE 250 in early trading. The index had declined 0.8% in the previous session.
Deutsche Bank raised its price target for Dunelm to 1,050 pence from 850 pence. The new target represents approximately 25% above the company’s September 2 closing price of 832 pence.
Deutsche Bank Focuses on Store Expansion and Digital Strategy
The brokerage said it expects Dunelm’s September 8 strategy update to act as a positive catalyst. Its areas of focus include the retailer’s store estate, its recently launched app and its longer-term target of achieving a 10% share of the UK market, compared with 7.9% in fiscal 2025.
Deutsche Bank expects management to discuss an accelerated programme of store openings. The brokerage forecasts nine new locations in fiscal 2027, compared with three in fiscal 2026, as well as further refurbishment opportunities across the existing estate.
According to Deutsche Bank’s estimates, approximately 10% of Dunelm’s stores are at an age where they could be due for a major refit, while around 60% have not undergone a refurbishment since before the pandemic.
The brokerage also identified Dunelm’s app, which fully launched in February, as an area to watch. It expects the strategy update to provide information on whether the app is affecting customer conversion and spending, product discovery and recommendations, the in-store experience and customer data collection.
Fiscal 2027 Profit Forecast Raised to £219 Million
Deutsche Bank increased its fiscal 2027 profit-before-tax forecast for Dunelm by approximately 4% to £219 million from £210 million. The revision reflects the brokerage’s expectations for higher sales growth and a greater contribution from new stores.
It forecasts sales growth of around 4% in fiscal 2027, broadly divided between like-for-like growth and additional retail space.
Before Thursday’s share-price move, Deutsche Bank said Dunelm shares had declined approximately 25% year to date and had underperformed the FTSE 350 Retail Index by around 30%.