Dunelm boosted by RBC Capital upgrade
Home furnishings retailer Dunelm got a boost on Tuesday as RBC Capital Markets upped its stance on the stock to 'sector perform' from 'underperform'.
Dunelm Group
983.00p
16:44 25/04/24
FTSE 250
19,601.98
17:09 25/04/24
FTSE 350
4,434.34
17:09 25/04/24
FTSE All-Share
4,387.94
16:49 25/04/24
General Retailers
3,915.52
17:09 25/04/24
RBC said it expects the company to continue to gain like-for-like market share in a "challenging" UK homewares market, on account of its strong value for money offer and range advantage over other retailers.
"We see upside risk to stable gross margin guidance for the full year and expect the profitability gap between stores and online to narrow over time as online becomes more efficient," it said.
It said the stock's valuation was now "more reasonable if not compelling".
RBC said that despite its recent underperformance, Dunelm is not screamingly inexpensive as a UK landlocked retailer with already 170 stores.
"It trades at 15x CY20E price-to-earnings and indicates a 3% yield, with a good chance of periodic special dividends given its strong contribution. Ultimately though, Dunelm is a well-managed specialty homewares retailer with a significant range advantage over the competition, and which should now reap the benefits from heavy omnichannel investment."
RBC maintained its 850p price target on the stock.
At 1320 BST, the shares were up 2.2% at 801p.