Dunelm Group plc (DNLM.L) | Investment Case

1. Company Snapshot

1.a. Company Description

Dunelm Group plc retails homewares in the United Kingdom.The company offers furniture for bedroom, living room, dining room, and office; sofas and chairs; bean bags; bed frames, mattresses, storage beds, divan bases, and headboards, as well as kids beds; and bedding products, such as bed linens, duvets, pillows, mattress toppers, protectors, and baby and kids beddings.It also provides curtains, and poles and tracks; blinds; rugs, runners, and door mats; mirrors, pictures and frames, clocks, wallpapers and DIY, cushions and throws, and accessories; lighting products, including ceiling and wall lights, lamp shades, floor and table lamps, and outdoor lights; kitchen products, such as cooking, dining, utility, and electrical products; and storage products for home, clothes, and kitchen, as well as travel and luggage products.

In addition, the company offers garden furniture and storage, garden decoration, and entertaining and dining products; and towels and bathmats, bathroom furniture, bathroom décor, and bathroom accessories, as well as trees and decoration, gifts, cook and dine, and trends Christmas products.It operates 175 superstores and 1 distribution centers, as well as sells its products through an online store at dunelm.com.Dunelm Group plc was founded in 1979 and is headquartered in Syston, the United Kingdom.

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1.b. Last Insights on DNLM

Dunelm Group's recent performance has been impacted by weak trade data from China, affecting the UK market. The company's FY2025 earnings report showed EPS of UK£0.77, a slight increase from FY2024. Revenue rose 3.8% to UK£1.77b. However, Deutsche Bank analysts have taken a cautious view on UK consumer stocks, cutting ratings on some retailers. Dividend stocks, including Dunelm Group, are being considered for stability and income potential amidst market volatility.

1.c. Company Highlights

Last Price	1125
Change Percentage	-0.18%
Open	1156
Previous Close	1127
Market Cap ( Millions)	2265
Volume	138128
Year High	1249
Year Low	836.61
M A 50	1119.44
M A 200	1109.92

FCF Yield	9.74%
Dividend Yield	3.96%
ROE	103.34%
Debt / Equity	317.93%
Net Debt / EBIDTA	138.42%
Price To Book	19.28
Price Earnings Ratio	14.66
Price To FCF	10.26
Price To sales	1.28
EV / EBITDA	10.4

2. Dunelm's Strong Performance Driven by Growth and Operational Efficiency

Dunelm's full-year results demonstrate a strong balance between growth and profitability, with sales rising 3.8% to £1.8 billion, outpacing the market. The company's gross margin expanded to 52.4%, up 60 basis points year-on-year, driven by effective operational cost control. Profit before tax was £211 million, a 2.7% increase, with a stable PBT margin of 11.9%. Earnings per share (EPS) came in at 0.291, slightly below estimates of 0.295. Operating cash flow was robust, supporting higher capital investment and resulting in free cash flows of £127 million. The company announced an increased total ordinary dividend for the year of 44.5p, reflecting its confidence in delivering sustainable, profitable growth.

Publication Date: Oct -27

                                    📋 Highlights
                                    Full-Year Sales Growth:
                                                Increased to £1.8 billion, up 3.8% YoY, outpacing market growth.
Gross Margin Expansion:
                                                Rose 60 basis points to 52.4%, driven by operational cost control.
Profit Before Tax:
                                                Reached £211 million, a 2.7% YoY increase with stable 11.9% margin.
Digital Sales Growth:
                                                Surpassed 40% of total sales, up 3 percentage points YoY.
Capital Investment:
                                                Planned £50 million CapEx for 5–10 new superstores and store refits in FY '26.

                                

Operational Highlights and Customer Growth

Dunelm saw broad-based growth in active customers, with an increased average item value. Digital sales participation rose by 3 percentage points year-on-year, making up 40% of total sales. The company grew its active customer base by 80 basis points, with strong growth in the 16- to 24-year-old cohort and in the London region. The average item value is still relatively low at just over £10, indicating potential for further growth.

Outlook and Guidance

Looking ahead, Dunelm expects a small net tailwind from freight and FX in FY '26 but anticipates challenges from inflation across its cost base. The company guides to CapEx of around £50 million for 5-10 new superstores and continued store refits. Trading so far has been positive, with a favorable response to new autumn/winter ranges. Analysts estimate next year's revenue growth at 4.6%, indicating a continued upward trajectory.

Valuation and Metrics

With a P/E Ratio of 14.88 and a Dividend Yield of 3.85%, Dunelm's valuation appears reasonable, reflecting its strong performance and growth prospects. The company's ROE of 103.34% and ROIC of 29.3% demonstrate its ability to generate returns on equity and invested capital. The EV/EBITDA ratio of 10.54 suggests a relatively attractive valuation compared to its earnings.

Strategic Focus Areas

Dunelm's ambition is to become the most trusted and valued brand in homewares and furniture, with a 10% market share. The company is focusing on three key areas: elevating product, developing channels, and harnessing operational capabilities. In furniture, Dunelm has built capabilities in product design and sourcing, with a curated range of strong sellers. The company is also investing in product development in textile categories and evolving its packaging and in-store experience.

3. NewsRoom

Estimating The Intrinsic Value Of Dunelm Group plc (LON:DNLM)

Nov -17

Source:

Dunelm Group plc (LON:DNLM) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Oct -28

Source:

Is Amer Sports, Inc. (AS) Stock Outpacing Its Consumer Discretionary Peers This Year?

Oct -21

Source:

Dunelm Group (LON:DNLM) Is Due To Pay A Dividend Of £0.28

Sep -15

Source:

Dunelm Group Full Year 2025 Earnings: EPS: UK£0.77 (vs UK£0.75 in FY 2024)

Sep -11

Source:

UK Dividend Stocks To Consider In September 2025

Sep -03

Source:

UK Dividend Stocks To Consider In September 2025

Sep -02

Source:

UK Dividend Stocks To Consider In September 2025

Sep -01

Source:

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.30%)

6. Segments

Homewares

Expected Growth: 5.3%

Dunelm Group plc's homewares segment is expected to grow driven by increasing consumer spending on home decor and furnishings, coupled with the company's strong online presence and expanding store network.

7. Detailed Products

Homeware

Dunelm offers a wide range of homeware products including bedding, curtains, and kitchenware.

Furniture

Dunelm sells a variety of furniture pieces such as sofas, chairs, tables, and desks.

Curtains and Blinds

Dunelm offers a wide range of curtains and blinds in different materials, styles, and designs.

Kitchen and Dining

Dunelm sells a variety of kitchen and dining products including cookware, tableware, and kitchen textiles.

Bed and Bath

Dunelm offers a range of bed and bath products including bedding, towels, and bathroom accessories.

Decor and Accessories

Dunelm sells a variety of decorative items including vases, candles, and wall art.

8. Dunelm Group plc's Porter Forces

Forces Ranking

Threat Of Substitutes

Dunelm Group plc operates in the home furnishings market, where substitutes are available in the form of second-hand or rented furniture. However, the quality and convenience offered by Dunelm's products mitigate the threat of substitutes to some extent.

Bargaining Power Of Customers

Dunelm Group plc operates in a market with a large number of customers, reducing the bargaining power of individual customers. Additionally, the company's wide range of products and services reduces the dependence on individual customers.

Bargaining Power Of Suppliers

Dunelm Group plc relies on a large number of suppliers for its products, which gives suppliers some bargaining power. However, the company's scale and reputation also give it some negotiating power.

Threat Of New Entrants

The home furnishings market has high barriers to entry, including the need for significant capital investment and a strong supply chain. This reduces the threat of new entrants to Dunelm Group plc.

Intensity Of Rivalry

The home furnishings market is highly competitive, with many established players competing for market share. Dunelm Group plc faces intense competition from companies such as IKEA, Argos, and John Lewis.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	48.46%
Debt Cost	3.95%
Equity Weight	51.54%
Equity Cost	9.45%
WACC	6.78%
Leverage	94.04%

11. Quality Control: Dunelm Group plc passed 5 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Kid

A-Score: 6.2/10

Value: 5.0

Growth: 6.7

Quality: 5.7

Yield: 9.4

Momentum: 4.0

Volatility: 6.3

1-Year Total Return ->

Dunelm

A-Score: 5.7/10

Value: 4.8

Growth: 4.9

Quality: 6.4

Yield: 9.4

Momentum: 3.0

Volatility: 6.0

1-Year Total Return ->

Deliveroo

A-Score: 5.3/10

Value: 4.6

Growth: 8.1

Quality: 4.6

Yield: 0.0

Momentum: 7.5

Volatility: 6.7

1-Year Total Return ->

Redrow

A-Score: 4.9/10

Value: 6.7

Growth: 3.8

Quality: 7.4

Yield: 4.4

Momentum: 4.0

Volatility: 3.0

1-Year Total Return ->

Frasers

A-Score: 4.8/10

Value: 7.4

Growth: 6.6

Quality: 4.9

Yield: 0.0

Momentum: 3.5

Volatility: 6.7

1-Year Total Return ->

JD Sports Fashion

A-Score: 4.1/10

Value: 8.1

Growth: 7.0

Quality: 5.0

Yield: 0.6

Momentum: 2.0

Volatility: 2.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-4.85%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

6.78%

Dunelm Group plc - GB00B1CKQ739

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on DNLM

1.c. Company Highlights

Higher Yield

Better Quality

Stable Momentum

Fairly Valued

Average Growth

Revenues Miss

Medium Volatility

Average Quality

Average Yield

2. Dunelm's Strong Performance Driven by Growth and Operational Efficiency

Operational Highlights and Customer Growth

Outlook and Guidance

Valuation and Metrics

Strategic Focus Areas

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.30%)

6. Segments

Homewares

Expected Growth: 5.3%

7. Detailed Products

Homeware

Furniture

Curtains and Blinds

Kitchen and Dining

Bed and Bath

Decor and Accessories

8. Dunelm Group plc's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Dunelm Group plc passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

11.25$

Current Price

11.25$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA