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.

Show Full description

1.b. Last Insights on DNLM

Dunelm Group plc faced challenges due to a sluggish consumer discretionary sector. Despite attention from investors, the company's recent performance was impacted by a subdued market environment. With no recent earnings release providing a clear catalyst, investors may be reassessing their stance. According to a recent report, the estimated intrinsic value of Dunelm Group is UK£11.89, slightly higher than its current trading price. Going ex-dividend soon may also influence investor sentiment.

1.c. Company Highlights

Last Price	982
Change Percentage	0.61%
Open	987
Previous Close	976
Market Cap ( Millions)	1990
Volume	882687
Year High	1249
Year Low	836.61
M A 50	1031.94
M A 200	1122.05

FCF Yield	10.19%
Dividend Yield	4.53%
ROE	105.88%
Debt / Equity	175.79%
Net Debt / EBIDTA	91.06%
Price To Book	12.11
Price Earnings Ratio	13.25
Price To FCF	9.81
Price To sales	1.1
EV / EBITDA	8.42

2. Dunelm's Interim Results: A Strong Start to the Financial Year

Dunelm reported a solid start to the financial year, with 3.6% year-on-year growth, driven by a strong first quarter with 6.2% growth, while the second quarter saw softer growth of 1.6%. The company's gross margin improved by 60 bps to 53.4%, and its market share position increased by 0.2 percentage points to 7.9%. Earnings per share (EPS) came in at 0.417, beating analyst estimates of 0.414. Profit before tax was £114 million, £9 million lower than last year, primarily due to operating cost dynamics. The company's free cash flow was £171 million, and the Board declared an interim ordinary dividend of 17p per share, up 3% year-on-year, and a special dividend of 25p per share.

Publication Date: Feb -16

                                    📋 Highlights
                                    Year-on-Year Growth::
                                                3.6% overall, with Q1 at 6.2% and Q2 at 1.6% growth.
Gross Margin Expansion::
                                                53.4% gross margin, up 60 bps, with market share rising to 7.9% (+0.2 pts).
Customer Satisfaction::
                                                Increased by 2.6 percentage points, driven by customer-focused initiatives.
Profit and Dividend::
                                                £114m pre-tax profit (down £9m YoY), 17p interim dividend (+3%), and 25p special dividend.
Digital Growth::
                                                New app with 130,000 organic downloads, 41% digital sales participation, and plans for expansion.

                                

Financial Performance

The company's operating costs increased by £32 million year-on-year, driven by volume-driven cost growth, inflation, and investment. However, Karen Witts, CFO, expects cost growth to moderate significantly in the second half of the year, with a lower national living wage increase in April 2026. Productivity gains will accelerate, primarily from the rollout of self-serve checkouts and efficiency gains in performance marketing. The effective tax rate is expected to be 50-100 basis points above the headline rate of corporation tax.

Valuation Metrics

With a P/E Ratio of 12.71 and an EV/EBITDA of 9.25, Dunelm's valuation appears reasonable. The company's ROE is 103.34%, indicating strong profitability. The Dividend Yield is 4.56%, and the Free Cash Flow Yield is 11.17%, suggesting a decent return for shareholders. The Net Debt / EBITDA ratio is 1.38, indicating a manageable debt position.

Operational Highlights

Dunelm is undergoing a strategic evolution, focusing on customers, products, and digital transformation. The company has launched a new app, with 130,000 customers downloading it organically, and is working to improve customer experience and personalization. Dunelm is also investing in its online platform, with 41% participation, and is launching an app to enhance customer experience. The company is expanding its smaller urban store format, which has been successful in locations like Westfield and Wandsworth.

Outlook

Dunelm is confident in its plans to deliver full-year profit before tax in line with consensus expectations. The company expects to achieve productivity gains in the second half of the year, driven by initiatives like self-serve checkouts and process improvements. Analysts estimate next year's revenue growth at 4.1%, indicating a steady trajectory for the company. With a strong foundation in place, Dunelm is well-positioned to drive growth and increase its market share.

3. NewsRoom

UK Dividend Stocks Alumasc Group And 2 More Top Picks

Feb -19

Source:

Some May Be Optimistic About Dunelm Group's (LON:DNLM) Earnings

Feb -18

Source:

Top UK Dividend Stocks To Consider In February 2026

Feb -18

Source:

3 UK Dividend Stocks Yielding Up To 8.8%

Feb -17

Source:

What Is Shaping The Evolving Dunelm Group (LSE:DNLM) Narrative Now

Feb -15

Source:

Top UK Dividend Stocks To Consider In February 2026

Feb -13

Source:

Dunelm Group H1 Earnings Call Highlights

Feb -10

Source:

What Could Be Shaping The Evolving Story For Dunelm Group (LSE:DNLM) Now

Feb -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: 5.1

Growth: 6.7

Quality: 5.6

Yield: 8.8

Momentum: 5.0

Volatility: 6.3

1-Year Total Return ->

Dunelm

A-Score: 5.7/10

Value: 4.7

Growth: 5.0

Quality: 6.4

Yield: 8.8

Momentum: 3.0

Volatility: 6.3

1-Year Total Return ->

Deliveroo

A-Score: 5.4/10

Value: 4.5

Growth: 8.1

Quality: 4.6

Yield: 0.0

Momentum: 7.5

Volatility: 7.3

1-Year Total Return ->

Redrow

A-Score: 5.1/10

Value: 6.8

Growth: 5.2

Quality: 7.4

Yield: 4.4

Momentum: 4.0

Volatility: 3.0

1-Year Total Return ->

Frasers

A-Score: 4.9/10

Value: 8.1

Growth: 6.6

Quality: 5.5

Yield: 0.0

Momentum: 3.5

Volatility: 5.7

1-Year Total Return ->

JD Sports Fashion

A-Score: 4.3/10

Value: 8.1

Growth: 7.1

Quality: 5.0

Yield: 0.6

Momentum: 2.5

Volatility: 2.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-5.60%

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 Interim Results: A Strong Start to the Financial Year

Financial Performance

Valuation Metrics

Operational Highlights

Outlook

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

9.82$

Current Price

9.82$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA