Panmure Liberum downgrades Dunelm to 'sell' as growth plan raises doubts

Retail & consumer Dunelm Group PLC DNLM View profile › Panmure Liberum downgrades Dunelm to 'sell' as growth plan raises doubts Ian Lyall Published 2d Share X in f @ Stockbroker Panmure Liberum has downgraded Dunelm Group PLC (LSE:DNLM) , the homewares retailer, from 'hold' to 'sell'. The broker cut its target price to 590p from 820p, implying further downside from Wednesday's closing share price of 734p. Analysts led by Ben Hunt questioned whether Dunelm could reaccelerate sales growth, deliver £100 million of cost savings and fundamentally reengineer its technology infrastructure over the next three years. The retailer set out its plans at a capital markets day on Tuesday, unveiling more than £260 million of growth investment over three years. Panmure Liberum, however, estimated that retailers hosting capital markets days, excluding Marks & Spencer, have historically seen their shares fall by about 30% on average over the following 12 months. The broker warned that much of the investment may be needed simply to arrest declining sales rather than to accelerate growth. Shareholders are being asked to accept lower near-term cash generation and reduced scope for special dividends in exchange for unproven growth. Panmure Liberum cut its profit forecasts by roughly 7%, citing signs that trading momentum is already slowing. Previous expectations had pointed to pre-tax profit of around £216 million for the year to June 2027. But management now expects adjusted pre-tax profit to remain broadly flat at about £211 million. The broker estimated that first-quarter sales could be running about 6% below prior expectations if the entire anticipated sales shortfall drops in the quarter, with unusually hot weather partly affecting trading. Dunelm’s strategy includes removing up to 40% of its in-store range in selected categories and redeploying about 25% of the freed-up space towards higher-productivity categories and room displays. But Panmure Liberum said the evidence supporting this approach remains limited, based on a small number of store trials. Market share gains have also started to slow after several years of steady growth, the broker added. Dunelm, which employs more than 11,500 people and operates 198 stores across the UK, has been under growing pressure to demonstrate that its investment can deliver the promised acceleration in sales.