Balancing Near-Term Trading Weakness and Longer-Term Resilience: Rationale for Maintaining a Hold Rating

Grace Gilberg, an analyst from Jefferies, maintained the Hold rating on Dunelm Group. The associated price target remains the same with p1,131.00.

Grace Gilberg has given his Hold rating due to a combination of factors reflecting both short-term weakness and longer-term resilience. The company’s second-quarter trading was notably softer than expected, with sales growth slowing and key seasonal periods such as Black Friday and the run-up to Christmas underperforming. Specific product areas like furniture were affected by supply and availability constraints, which compounded the weaker demand environment and weighed on first-half profitability. As a result, management now anticipates full-year profit before tax to come in at the lower end of prior guidance, implying a modest downgrade relative to market expectations.

At the same time, Gilberg acknowledges that some of the second-quarter softness may be due to sales being pulled forward into a stronger first quarter, which partially mitigates concern about an underlying deterioration in demand. Management has also pointed to an improvement in trading trends at the start of the third quarter, helped by the Winter Sale, suggesting that the business retains commercial momentum. However, the visibility on sustained recovery remains limited, and the near-term earnings outlook has become more constrained. Balancing these headwinds with the company’s underlying strengths, Gilberg concludes that the risk‑reward profile is currently fairly balanced, supporting a Hold rather than a more decisive Buy or Sell stance.

Based on the recent corporate insider activity of 14 insiders, corporate insider sentiment is neutral on the stock.