Berenberg downgrades DFS, prefers Dunelm

Analysts at Berenberg downgraded their recommendation for shares of DFS Furniture from 'buy' to 'hold' on anticipation that management's guidance for improved demand in mid-2024 would prove premature.

The furniture retailer's latest guidance implied a pick up in demand between the third and fourth quarters of the company's 2024 fiscal year ending in June.

Berenberg's own forecasts were calling for an improvement towards the end of calendar 2024.

Furthermore, the shares' valuation already accounted sufficiently for volume growth in financial year 2025.

However, DFS was said to be meeting its cost efficiency targets "with merit".

"Given the near-term uncertainty, we view the current valuation of c11x 12-month forward EV/EBIT as challenging.

"Dunelm continues to be our preferred exposure to an improvement in UK retail demand given its materially lower average product value and our perception of conservatism in near and medium term company and consensus targets."