Dunelm continues to outperform, says Berenberg

Berenberg has reiterated its 'buy' rating on Dunelm after the homewares retailer's strong annual results this week, saying that its market outperformance should continue.

"Dunelm reported strong FY23 results, reflecting the continuation of further market share gains, which has been the key driver of its revenue growth since its IPO in 2006. We expect market share gains to carry forward into FY24 given the strong start to the year, which has been volume-driven," Berenberg said.

The broker raised its target price from 1,340p to 1,370p after the results, which showed a 5.5% rise in sales to £1.64bn while earnings per share fell 8.6% to 75p – considerably better than a lot of the wider sector.

Berenberg said the company's end-market resilience appears to be related to its value offering: "The relative resilience of Dunelm’s end-market appears to be partly attributable to the low price point of the product base. Dunelm’s average product value is £14 and its average basket size has three items. We encounter investor commentary that incorrectly groups Dunelm with 'big ticket item' furniture names such as DFS, which have recorded considerably more demand decline – we view this coupling as misplaced."

Dunelm's shares are trading at 14.2 times forward earnings, below the three-year average.

The stock was up 2.4% at 1,085p by 1311 BST.