Dunelm shares slide after weak start to FY27, muted reaction to new growth strategy

(Sharecast News) - Homewares retailer Dunelm shares dropped around 10% on Tuesday as investors reacted coolly to the homewares retailer's new threeyear growth plan and news of a softer start to FY27, despite the group reporting a steady fullyear performance.

Dunelm said total sales rose 3.1% to £1.83bn, digital participation increased two percentage points to 42%, and gross margins edged up ten basis points to 52.5%. Pre-tax profits were unchanged at £211m, while free cash flow jumped £27.4m to £154.8m.

The FTSE 250-listed group also noted that it had opened two new stores during the period, while also relaunching its Yeovil site after a fire, and rolling out its new app with an AIpowered shopping assistant. Ordinary dividends rose to 45.5p per share, though the special payout was £0.10 lower yearonyear at £0.25 per share.

However, Dunelm also said trading in the first six weeks of FY27 had been "significantly softer" due to an extended period of unusually hot weather, though performance improved once temperatures cooled, helped by stronger online conversion and increased store footfall.

The retailer also unveiled its "Winning Hearts & Homes" strategy, a threeyear plan aimed at accelerating growth by boosting customer loyalty, returning to midtohigh singledigit sales growth and delivering consistently strong returns. The programme includes removing around £100m of unproductive costs by FY29, increased investment in stores and digital platforms, and targeted capital expenditure to support expansion. Dunelm said the plan would be funded through its cashgenerative model and disciplined capital allocation.

AJ Bell's Dan Coatsworth said: "A warning about weaker trading in July and August has knocked Dunelm's shares for six, sending them down 10% as analysts sharpen their knives to cut profit expectations. It's not the ideal scenario to launch a new three-year growth plan.

"It will clearly have to spend money to make money, with plans to upgrade existing stores and open new ones. While that has the potential to generate benefits down the line, investors are increasingly short-term in focus and might simply see these efforts as gobbling up cash that might have otherwise been used for greater share buybacks and/or dividends."

As of 0855 BST, Dunelm shares were down 10.5% at 793.46p.

Reporting by Iain Gilbert at Sharecast.com

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