Dunelm Group PLC (LSE:DNLM) shares fell sharply traded as low as 11% to 787.5p in morning trade after the homewares retailer unveiled a three-year investment plan that is expected to leave profit broadly flat in the current financial year.
Dunelm is targeting a return to mid-to-high single-digit annual sales growth through new stores, refurbishments, range simplification and increased customer loyalty, while around £100 million of costs will be removed and reinvested in the business.
However, management expects adjusted profit before tax in the 2027 financial year to be broadly in line with 2026 as savings are recycled into growth initiatives.
Peel Hunt, which retained its ‘Buy’ rating and 1,225p target price, cut its 2027 profit before tax forecast by around 3% to £211 million. It expects sales growth of roughly 5%, compared with its previous 3% forecast.
The broker also reduced its 2028 profit forecast by around 1.5% to £221 million and expects no special dividends before 2029 as Dunelm steps up investment.
Around £125 million of additional capital expenditure is planned over three years, alongside £30 million to £40 million of one-off expenditure.
Peel Hunt, nevertheless, said the strategy provides a “blueprint to back” after a period in which revenue and profit growth had stalled.
