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Highlights

  • Interim pre-tax profit falls 7.5% despite higher revenue growth
  • Full-year profit guidance maintained in line with consensus
  • JPMorgan upgrades stock as trading improves in early Q3

Dunelm Group Plc (LSE:DNLM) reported a decline in first-half profit after a weaker second quarter, but pointed to improving sales in early Q3 and reaffirmed its full-year earnings outlook, with the share price moving higher in London morning trade.

Financial performance

For the 26 weeks to 27 December 2025, pre-tax profit fell 7.5% to £114 million. Revenue increased 3.6% year on year to £926.3 million, with the decline in profit partly reflecting the timing of certain costs.

The company expects FY2026 pre-tax profit to be in line with consensus forecasts of around £214 million, within a guided range of £210 million to £221 million.

Dunelm declared an interim dividend of 17p per share and a special dividend of 25p.

A half of two contrasting quarters

Trading performance differed across the period. Sales grew 6.2% in the first quarter but slowed to 1.6% in Q2, marking the third consecutive year of softer second-quarter growth.

The retailer said it had deliberately limited promotional activity ahead of Christmas, concentrating its main sales events in January and June. It is now reviewing how its Q2 trading approach affects customer behaviour and business performance.

Market conditions remained challenging, with subdued consumer confidence and a difficult December for UK retail, alongside intense Black Friday competition in both discounting depth and marketing spend.

Early Q3 improvement and strategic initiatives

Sales growth in the third quarter to date has strengthened, supported by the Winter Sale and the launch of new spring product ranges.

The company highlighted the upcoming full app launch in spring and plans to restore furniture availability as key operational priorities for the second half.

Chief executive Clo Moriarty, who joined in October, said the early weeks in the role had reinforced confidence in the group’s long-term opportunities, noting its relatively low market share and scope for further expansion.

Broker views and valuation reset

Shore Capital, which has a Buy rating on the stock, said the improvement in Q3 trading suggested the weaker second quarter was a one-off rather than a structural shift.

JPMorgan upgraded Dunelm to Overweight from Neutral, stating that the balance of risk had changed following a 15% year-to-date share price decline linked to Q2 sales disappointment and concerns over profit phasing.

The bank noted the stock is now trading on about 12 times CY2026 earnings, broadly in line with the sector average, compared with its historical premium. It also highlighted a free cash flow yield of around 11%.

JPMorgan trimmed its price target to 1,225p from 1,240p and lowered its FY2026 pre-tax profit forecast by 3%, now expecting £213 million, broadly aligned with consensus.

Outlook

Despite a variable consumer environment, Dunelm said it remains confident in its plans for the second half, supported by product launches, digital expansion and operational initiatives.

Share price reaction

Dunelm Group Plc (LSE:DNLM) shares were last trading at 975.50p, up 1.50p or 0.15%, as of 17 February, 2026.

Frequently Asked Questions (FAQs)
1. Why did Dunelm’s interim profit decline in H1 FY26?

Pre-tax profit fell due to softer second-quarter sales and the timing of certain costs, despite higher revenue.

2. What is Dunelm’s full-year profit guidance?

The company expects FY2026 pre-tax profit to be broadly in line with consensus at around £214 million.

3. What are brokers saying about Dunelm’s shares?
Shore Capital maintains a Buy rating, while JPMorgan has upgraded the stock to Overweight with a 1,225p price target.