RBC Capital Markets has issued an optimistic research note, revising its rating for Dunelm Group, a leading British retailer specializing in home furnishings and household goods listed in London. The brokerage upgraded its judgment on the company to Outperform and established a new target price of 1,300 pence, an increase from the previous 1,200 pence. This action stems from increased expectations for more robust revenue expansion, significant margin improvements, and a powerful cash flow generation capacity.
The market responded promptly, with the stock experiencing a noticeable rise of approximately four percent shortly after the announcement. According to RBC analysts, the valuation of Dunelm Group remains compelling. The stock is currently trading at approximately 13.5 times expected 2026 earnings per share (EPS), which is well below its historical average multiple of nearly 16 times. RBC views this discrepancy as a clear opportunity, particularly in light of the retailer's solid market standing and the proven efficiency of its operating model.
The research team identifies several core drivers underpinning the upgrade. These include sustained margin enhancements, continuous growth in market share, and the company's established commitment to returning capital to shareholders. For the fiscal year 2026, RBC forecasts positive financial trajectories: adjusted EPS is projected at 81.66 pence (a 5.9% year-on-year increase); revenues are expected to reach £1.86 billion (a 5.1% increase); profit before tax is anticipated at £223 million, up from the £211 million forecast for 2025.
Analysts also foresee a special dividend of 25 pence in February 2026, consistent with the group's policy of returning substantial liquidity—over £500 million in the past decade—to its investors. A key element supporting the positive outlook is the anticipated expansion of the gross margin by 50 to 100 basis points in the first nine months of the new financial year, partially aided by favorable currency exchange rates on imports. The company maintains a low capital expenditure model and is actively enhancing its omnichannel approach under the new CEO, Clodagh Moriarty, targeting a 10% share of the UK home living market.
