Canaccord Genuity lowers target price on Dunelm

(Sharecast News) - Analysts at Canaccord Genuity lowered their target price on homewares retailer Dunelm on Thursday, cutting it from 1,240p to 1,185p, although the broker maintained its 'buy' rating as it updated forecasts following the group's new threeyear growth plan.

Canaccord Genuity said Dunelm's Winning Hearts & Homes strategy was a "sensible and credible" evolution of its existing model, aimed at reaccelerating sales growth through stronger customer engagement, improved merchandising, further omnichannel investment and optimisation of the store estate.

While the plan requires a notable stepup in investment over the next three years, Canaccord said the financial targets were realistic and supported by a significant costsaving programme.

Canaccord said Dunelm had delivered a solid FY26 performance, with sales up 3.1% to £1.83bn, gross margins rising to 52.5%, and pretax profits steady at £211m, in line with expectations. Digital penetration increased to 42%, and free cash flow of £155m supported higher ordinary and special dividends.

The Canadian bank stated the strategy will require around £125m of incremental capex between FY27 and FY29, plus £30 to £40m of nonrecurring investment costs. Canaccord expects this investment phase to weigh on nearterm earnings and likely pause special dividends, though it reckons ordinary dividend growth should continue. FY27 guidance points to adjusted pre-tax profits broadly flat yearonyear.

Canaccord trimmed its FY27 and FY28 profit forecasts by 2% and 1%, respectively, prompting the reduced target price. Even so, it maintained that Dunelm remains well placed to take further market share in a fragmented sector.

Reporting by Iain Gilbert at Sharecast.com