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Canaccord Genuity lowers target price on Dunelm following Q3 figures
(Sharecast News) - Canaccord Genuity lowered its target price on homewares retailer Dunelm from 1,280p to 1,240p on Friday after the group's recent third quarter numbers highlighted "softer recent trading". Dunelm saw group sales rise 2.1% to £471.6m in Q3, with initial strong growth seen across the start of the quarter, as reported at the time of its interim results in February, before a period of broad-based softening in trading during March.
Canaccord Genuity noted that Dunelm's digital sales "remained encouraging" during the quarter and represented 43% of its total sales mix, up two percentage points year-on-year, reflecting "sustained progress" across online, click and collect and in‑store digital channels.
The Canadian bank pointed out that gross margins had increased by roughly 30 basis points year-on-year, supported by ongoing FX tailwinds seen in H1, but partly offset by customers trading into more discounted products compared to full price lines.
Canaccord Genuity, which reiterated its 'buy' rating on the stock, also highlighted that cost and productivity plans at Dunelm remained on track, with the group focused on "disciplined execution despite a more uncertain consumer backdrop".
"The group remains cautious on the near-term outlook given ongoing global uncertainty, with recent events in the Middle East expected to have only a small direct cost impact this financial year. While trading remains resilient and cost plans are on track, management is not assuming any immediate recovery in consumer confidence and therefore expects FY26 PBT to be towards the lower end of market consensus of £213m (range £210m to £217m)," said the analysts.
"We have reduced our FY26E estimate by 2% to £210m, whilst taking a slightly more prudent stance for outer years reducing forecasts by 4%, given the ongoing geopolitical uncertainty and potential near-term impact on the UK consumer outlook."
Canaccord said Dunelm trades on a FY26/27 price-to-earnings ration of 10.6x/10.3x with a FY26 dividend yield of 5.6%.
Reporting by Iain Gilbert at Sharecast.com
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