J.P. Morgan upgraded Dunelm Group to overweight from neutral, arguing the UK home furnishings retailer's operational improvements under new CEO Clo Moriarty justify renewed optimism. While cutting its price target to 1,225p from 1,240p, the bank noted Dunelm shares now trade at 12x 2026 earnings - in line with sector averages after a 15% year-to-date decline.

The analysis follows a challenging start to 2026 marked by weaker Q2 sales and profit timing concerns. J.P. Morgan highlighted concrete changes since Moriarty's appointment, including expanding best-selling product availability to all stores from 70%, simplifying sub-brands, and reducing delivery complaints by 20% through packaging redesigns. These shifts come as the company rephases costs, with 53% of 2026 profits now expected in H1 versus 58% previously.

Financial adjustments include a 3% reduction in 2026 pretax profit forecast to £213 million, mirroring consensus estimates. The bank maintained mid-single-digit annual profit growth projections beyond 2026 but trimmed special dividend expectations after Dunelm paid 25p per share versus 35p last year. Despite near-term headwinds, analysts argue operational tweaks position the retailer for improved performance.