Dunelm Group PLC's (LSE:DNLM) latest trading update has prompted Deutsche Bank to raise its full-year profit forecast and price target, after the homewares retailer delivered better-than-expected sales and an encouraging improvement in margins.
Third-quarter revenue rose 6.3% to £462 million, beating Deutsche’s estimate of £454 million and the market consensus of £448 million.
Growth was driven by higher volumes and average order values, which analysts say points to further market share gains in a competitive retail environment.
Gross margin expanded by 30 basis points, taking the year-to-date margin to around 52.4%. Deutsche said the company’s current full-year profit guidance (which pegs pre-tax earnings at £208 million) now looks conservative. Depending on fourth-quarter performance, there could be room for upgrades.
Deutsche Bank increased its price target on the shares from 1,270p to 1,280p and reiterated its 'buy' rating. The broker described Dunelm as a “quality compounder” with strong cash returns and clear momentum on both sales and profitability.
The shares were unchanged at 1,078p.