Dunelm shares moved notably higher on Thursday after Deutsche Bank elevated its recommendation on the UK homewares chain from "hold" to "buy." At about 08:57 BST the stock was trading at 861.78 pence, up 3.58% on the day, outperforming the wider FTSE 250, which ticked up modestly following a 0.8% decline in the prior session.
The brokerage also raised its target price to 1,050 pence from 850 pence, a level Deutsche Bank said implies roughly 25% upside relative to the September 2 closing price of 832 pence.
Deutsche Bank flagged Dunelm’s planned strategy update on September 8 as a likely positive driver for the shares. The broker’s note focuses on three operational levers it believes could underpin stronger earnings - a faster programme of store openings, additional refits of the existing estate and gains from the retailer’s new app, which fully launched in February.
On store expansion, Deutsche Bank expects management to outline a stepped-up rollout, forecasting nine new store openings in fiscal 2027 compared with three in fiscal 2026. The broker said it anticipates a larger contribution from those new locations to profits, and factored that into its forecast adjustments.
Turning to the existing estate, Deutsche Bank estimates about 10% of Dunelm’s stores are at an age where a major refit could be warranted, and that roughly 60% of locations have not been refitted since before the pandemic. Those figures inform the broker’s view that additional refurbishments represent a tangible opportunity to lift sales and margins.
The note also highlighted the retailer’s new app. Deutsche Bank expects management to address whether the app is enhancing customer conversion and average spend, aiding product discovery and recommendations, improving the in-store experience and expanding the retailer’s collection of customer data.
Operational expectations fed into the broker’s financial revisions. Deutsche Bank raised its fiscal 2027 profit-before-tax forecast by about 4%, to £219 million from a prior £210 million estimate. The upgrade reflected the broker’s view of stronger sales growth and a higher profit contribution from new stores. Deutsche Bank projects around 4% sales growth in fiscal 2027, split broadly between like-for-like performance and the addition of new space.
The upgrade follows a challenging fiscal 2026 for Dunelm. Deutsche Bank noted the stock had fallen about 25% year-to-date before Thursday’s move and said the shares had underperformed the FTSE 350 Retail Index by roughly 30% over that period.
Market context: The broker’s revised forecasts and heightened confidence in operational levers appear to be the immediate reasons for the price-target increase and recommendation change. Investors will be watching the September strategy update closely for details on rollout timing, refit plans and any early app performance metrics.