House improvement and homewares groups still have a way to run, according to broker UBS, which rates retailer Dunelm Group PLC (LSE:DNLM) as its top pick closely followed by kitchen specialist Howden.
Drivers underpinning the pair over the next 12 months include a buoyant housing market, growth in e-commerce and a sustained focus on "home" as WFH grows.
On the macro front, people still have money built up to spend, mortgage rates are low and economic data still robust.
Strategically, UBS prefers companies exposed to the UK with a slight bias towards cyclical, hence the choice of Dunelm as top pick (target 1,750p), given its "exposure to UK homewares, attractive growth profile, strength in online and consistent top-line performance".
Howden is a 'buy', while Kingfisher and DFS are 'holds'.
Dunelm shares rose 6% to 1,385p