Dunelm Group PLC shares could be poised for a recovery after a difficult start to the year, according to JPMorgan, which has upgraded its recommendation.
The homewares retailer has fallen 15% year to date after weak second-quarter sales and concerns over profit weighting between the first and second half.
Shares now trade for about 12 times 2026 earnings, in line with the long-run sector average, compared with a historic double-digit premium.
JPMorgan argues that expectations have now been reset, while Dunelm offers one of the highest free cash flow yields in its coverage at about 11%.
New chief executive Clo Moriarty has set out a strategy of “evolution” rather than overhaul, using data to refine ranges and ensure best-selling lines are stocked across all stores. Early operational changes, including packaging tweaks to cut delivery complaints, are already feeding through.
JPMorgan trimmed its 2026 pre-tax profit forecast by 3% to £213 million but moved to an 'overweight' rating from 'neutral', seeing profits growing modestly this year and then at a mid-single-digit pace thereafter, with risks seen as being skewed to the upside.