Jefferies upgraded Dunelm to "buy" from "hold" following a 20% share price drop after weaker quarterly trading. The UK homewares retailer now trades at an 11x PE ratio, roughly 30% below its long-term average valuation. The broker kept its price target at 1,075p, suggesting potential upside of approximately 16% from recent levels.
The downgrade followed Dunelm's second-quarter trading performance where revenue growth slowed to 1.6% from 6.2% in the first quarter. Full-year profit expectations were cut by about 4%, though first-half revenue growth remained at 3.6%. Jefferies characterized the market reaction as disproportionate relative to the earnings adjustment.
Dunelm maintains its position as the UK's largest home furnishing retailer with around 200 superstores. The company generated £1.77 billion in revenue last year and continues steady cash flow generation. Jefferies sees value in the current valuation despite recent trading challenges.
Quick Fact: Dunelm's market capitalisation is £1.9 billion.
Source: Investing.com · Summarized by HeadlinesBriefing