Search Share Prices
Canaccord drops target on Dunelm following 'hugely disappointing' update
Following an unexpected and "hugely disappointing" trading update from Dunelm on Friday, analysts at Canaccord Genuity opted to lower their target price on the home furnishings retailer despite "doggedly" sticking with its 'buy' rating on the firm.
After a reassuring third quarter, Dunelm turned in an abrupt 4.7% decline in like-for-like store sales for the fourth quarter-to-date, despite online LFL sales moving ahead at a stronger-than-expected clip of 43.7%, something the retailer has blamed on weaker footfall.
Canaccord noted that Dunelm continues to believe it has outperformed the market and, with its management not pointing to any change in tactics (nor in the competitive environment), has guided to a full-year increase in group sales of roughly 10% to £1.05bn and pre-tax profit just below last year's £109.3m figure.
Yet both of those forecasts are short of consensus estimates of £1.07bn and £115m, respectively.
"Hugely disappointing after the reassuring Q3. Quarterly trading has long been volatile at Dunelm, often impacted by the weather, but after a series of cuts to numbers, the question arises as to whether there is a deeper issue here," Canaccord said on Tuesday.
However, the team at Canaccord said they continued to think that Dunelm's core business was sound, but noted that the sector itself was a "minefield at the moment" for both good and bad retailers.
"For now, we doggedly stick with a 'buy', reducing our DCF based price target from 714p to 675p to reflect lower forecasts.
"We accept that it will be some time before investors can regain confidence," the broker concluded.