Peel Hunt, a London broker, has praised Dunelm as a "coiled spring" following its impressive sales growth and recent surge in share value.
The Leicester-based retailer, part of the FTSE 250 index, boasts a "clear moat" over its rivals due to its expansive product range, growing customer base, and superior online shopping experience, Peel Hunt analysts highlight, as reported by .
They suggest that the homeware giant is poised to deliver a "materially stronger" performance than current projections indicate.
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This commentary follows Dunelm's announcement of a £462m turnover for the third quarter, marking an increase of over six per cent.
Dunelm's consistent sales uptick in recent years can be attributed to its emphasis on customisable, affordable furniture and home items.
The company's shares have experienced a notable uptrend, escalating from 858p on 7 April to 1,184p, with Peel Hunt setting a target price of 1,375p for Dunelm.
Dunelm 'mindful of uncertainty and volatility'
Despite acknowledging the prevailing uncertainty and market volatility, Dunelm remains cautiously optimistic.
Peel Hunt analysts believe that the group's three-year forecast assumptions are extremely conservative, suggesting that a resurgence in consumer spending could surpass these expectations.
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They further note that Dunelm's strategic investments and enhanced capabilities have positioned it at the forefront of the anticipated consumer recovery.
While low consumer confidence has cast a shadow over the retail industry amid the cost-of-living crisis, there are indications that consumer sentiment may be recovering from its nadir.
The sector has been hit by escalating costs, stemming from elevated business rates and higher taxes.
Dunelm acknowledged that it has succeeded in only "partially offset" the inflationary effects of a new packaging tax and an increase in employer's National Insurance contributions through productivity measures.
"We are mindful of increased levels of uncertainty and volatility in the current environment, and the known labour cost headwinds," CEO Nick Wilkinson remarked in April.
"[But] we remain confident in our plans and the strategic progress we are making, and are on track to achieve our milestone of 10 per cent market share in the medium term."