Director dealings are essentially insider transactions for shares between directors and the companies they work for. These dealings are always made public, and are often considered a good indicator of a company’s future prospects. However, they don’t get nearly as much attention as other company news due to their complex nature. Nonetheless, here I’m breaking down this week’s biggest director dealings from three FTSE firms.

Rolls-Royce

Rolls-Royce (LSE: RR) is a British multinational aerospace and defence holdings company. It is one of the world’s largest makers of aircraft engines, and operates in four different segments. These include civil aerospace, power systems, defence, and new markets.

After a disappointing set of H1 results, Rolls-Royce shares saw yet another decline. But this week, a number of director dealings were carried out. Most notably, there was a huge purchase of shares from Chairwoman Anita Frew. The purchase from such a senior director should improve sentiment surrounding the stock.

• Name: Anita Frew
• Position of director: Chairwoman
• Nature of transaction: Purchase of shares
• Date of transaction: 5 August 2022
• Amount bought: 50,000 @ £0.83
• Total value: £41,300

• Name: Lee Hsien Yang
• Position of director: Non-Executive Director
• Nature of transaction: Share purchase plan
• Date of transaction: 8 August 2022
• Amount bought: 1,161 @ £0.84
• Total value: £980.23

• Name: Wendy Mars
• Position of director: Non-Executive Director
• Nature of transaction: Share purchase plan
• Date of transaction: 8 August 2022
• Amount bought: 2,156 @ £0.84
• Total value: £1,820.31

• Name: Sarah Armstrong
• Position of director: Chief People Officer
• Nature of transaction: Share purchase plan
• Date of transaction: 9 August 2022
• Amount bought: 175 @ £0.86
• Total value: £149.84

• Name: Rob Watson
• Position of director: President (Rolls-Royce Electrical)
• Nature of transaction: Share purchase plan
• Date of transaction: 9 August 2022
• Amount bought: 175 @ £0.86
• Total value: £149.84

Admiral

Admiral (LSE: ADM) is a British-based insurance company. It specialises in car insurance products, but also has a line of other offerings. These include home insurance, travel insurance, pet insurance, and van insurance.

The FTSE 100 firm released its H1 results earlier this week. Although profits slumped by almost half, the stock still shot up by 15% this week. This was most likely due to the announced special dividend of 15.8p. This would bring its total dividend to 60.0p per share. Investor sentiment was also further boosted when the Chairwoman purchased shares worth over £25,000.

• Name: Annette Court
• Position of director: Chairwoman
• Nature of transaction: Share purchase plan
• Date of transaction: 11 August 2022
• Amount bought: 1,181 @ £22.44
• Total value: £26,501.64

Dunelm

Dunelm (LSE: DNLM) is one of Britain’s biggest home furnishings retailers with an ever-growing market share. It operates over a 170 stores throughout the UK and offers over 50,000 products across a broad range of categories.

The FTSE 250 firm released its Q4 trading update not too long ago, and the interim numbers resonated well with investors. Nevertheless, its bottom line figure is yet to be released, and investors are wondering whether their expectations will be met. Therefore, the recent purchases by its CFO and another director could be an indicator of an earnings beat. The company is expected to report its official FY22 results in less than a month’s time.

• Name: Vijay Talwar
• Position of director: Non-Executive Director
• Nature of transaction: Purchase of shares
• Date of transaction: 4 August 2022
• Amount bought: 9,670 @ £8.50
• Total value: £82,156.32

• Name: Karen Witts
• Position of director: Chief Financial Officer
• Nature of transaction: Purchase of shares
• Date of transaction: 5 August 2022
• Amount bought: 1,174 @ £8.45
• Total value: £9,922.18

Types of shares

To provide context, there are a few types of shares that can be purchased by directors. Some directors opt to purchase shares via the open market. Having said that, directors also have the option to purchase shares via a share incentive plan (SIP).

A SIP is an employee plan for companies within the UK to flexibly award shares to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this week’s set of director dealings, a certain number of directors opted to purchase shares via their companies’ share purchase plans. This allows employees to purchase shares through automatic deductions from their pay. And this was the case with a number of Rolls-Royce directors, as well as Admiral’s Chairwoman.

The post Director dealings: Rolls-Royce, Admiral, Dunelm appeared first on The Motley Fool UK.

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John Choong has positions in Dunelm Group. The Motley Fool UK has recommended Admiral Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Dunelm (LSE: DNLM) released its provisional FY22 results yesterday. While a couple of key figures were missing — earnings per share (EPS), profit before tax (PBT), and expenses — the numbers that were disclosed point towards a positive year for the FTSE 250 firm. Consequently, Dunelm shares rose 5%.

A green rebound

So far, so good — that’s my main takeaway from Dunelm’s latest trading update. The company managed to beat a large number of analysts’ expectations, while delivering growth in its top line. As an investor, this is music to my ears. On a three-year basis, total sales are 41% higher, which shows that Dunelm is growing beyond its pre-pandemic levels rather substantially.

Additionally, Dunelm expects pre-tax profit to come in above the average consensus of £207m. The only bad figure in its top line report seemed to be the 6% year-on-year sales decline in Q4. Nonetheless, this was down to tough comparisons from pandemic reopening tailwinds, and was still above analysts’ estimates.

There wasn’t much information on the retailer’s bottom line, however. Management only disclosed its gross margin, which is expected to fall by 0.4% to 51.2%. This seems to be the only metric that missed estimates of 51.7% for now. Nevertheless, the board expects its gross margin to return to its long-term average in FY23. More details will be available on 14 September when the firm releases its full earnings report.

Lighting it up

Aside from stellar top-line numbers, Dunelm also has a number of developments lined up. For one, it opened and retrofitted four new stores last year. Additionally, it’s aiming to upgrade its digital functionalities to improve customers’ experiences. Moreover, it’s planning to strengthen its product capabilities, bringing better value proposition to its customers. These steps should help it capture more market share.

Furthermore, outgoing Whitbread CEO Alison Brittain was announced as an independent non-executive directors and chair designate. This is excellent news as I believe Brittain’s arrival on the board will help Dunelm grow while maintaining healthy margins in a high-inflationary environment. Her considerable experience and expertise from running a range of consumer-facing companies should come in useful.

Putting worries to bed?

Despite declining retail sales data in recent months, I identified Dunelm as an outlier to outperform its peers, given its growing base of customers, low average prices, and standout quality. This was evidenced in Dunelm’s sales performance, which beat the industry average on an annual basis (16% vs -4%), and three-year basis (41% vs 6%). This goes to show the British firm’s resilience in the current macroeconomic environment, amid declining sales in household goods stores. CEO Nick Wilkinson even mentioned that sales in the first half of July are off to a solid start.

Taking everything into consideration, are Dunelm shares a solid investment? I think so. For now, the company is hitting all the right notes, and I’m eager to see whether its EPS will beat estimates amid the current inflationary environment. If it somehow does, its current price of £8.60 and 4% dividend yield is going to seem like a steal. So, on the basis of these numbers, I’ll be looking to buy more Dunelm shares for my portfolio.

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John Choong owns shares of Dunelm. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Earnings results are a great way for investors to judge a company. They’re used to determine whether companies are on track with their initial guidance. These results can often radically move share prices in either direction, depending on the numbers reported. So, here’s an earnings preview for three FTSE firms reporting results this week.

It’s always best to compare firms’ new quarterly/half-year numbers to those from prior years. But certain revenue figures may have been impacted by the pandemic, so it’s important to get context from pre-pandemic levels too. The new figures that are due can also be useful to determine whether a company can perform better than its previous year’s numbers, or if it can beat analysts’ annual forecasts. It’s a shame that analysts in the UK don’t normally publish earnings previews for quarterly or half-year periods.

Royal Mail (Q1 trading update)

Royal Mail (LSE: RMG) is Britain’s biggest postal service and courier company. The group runs the brands Royal Mail and GLS (an international logistics company). The FTSE 250 firm is expected to provide a trading update for its most recent Q1 performance ending June 2022 on Wednesday 20 July. The company’s financial year ends in March 2023.

Analysts covering Royal Mail are predicting a slowdown in both its top and bottom lines for the current financial year. The board painted a gloomy picture for the group in its Q4 earnings call, which sent the share price crashing. Lockdown tailwinds have dissipated, and the logistics group is locked in discussions with staff over its latest pay round, with the threat of possible strike action. Pair that with a slowing British economy and high fuel costs, and it seems to me that the only way for its share price to go is down. Making matters worse, EPS for its current year has seen a steady decline from £0.54 to £0.45 over the last 90 days. Nonetheless, if revenue figures come in above 2020 levels, there could be a surprise rally.

Howden Joinery (H1 earnings)

Howden Joinery (LSE: HWDN) is the UK’s number one trade kitchen supplier. It provides thousands of products across kitchens, joinery, and hardware. The FTSE 100 firm is expected to post its half-year earnings for its six months performance ending June on 21 July. The company’s financial year ends in December 2022.

The overall consensus is that Howden Joinery is expected to continue growing its top and bottom lines. Analysts have also revised their EPS targets for the current year upwards, by nearly £0.01 in the last 90 days. That being said, investors will be paying attention to the guidance provided on Thursday in order to determine whether the supplier can beat its previous year’s record figures.

Dunelm (Q4 trading update)

Dunelm (LSE: DNLM) is a British home furnishings retailer that operates throughout the UK. It’s one of the largest homewares retailers in the country with an ever growing market share. The FTSE 250 firm will be posting its Q4 trading update for the period ending June 2022 on Thursday 21 July. The company’s financial year ends in June 2022.

While public listed companies normally release their full year results along with their Q4 numbers, Dunelm will only report its FY earnings on 14 September. This is most likely due to its financial year only ending three weeks ago. Therefore, the trading update will be more akin to an earnings preview.

Having said that, the revenue figure will be watched closely as specific bottom line figures will only be released in September. Comments from the board will also be closely monitored as investors look to determine whether EPS estimates will be met. Nevertheless, analysts have revised their EPS targets from £0.79 to £0.80 in the last 90 days. Despite that, a slowdown in retail sales in the last quarter should be kept in mind. It may have impacted Dunelm’s top line figure, along with higher fuel and labour costs. These macroeconomic factors could see analysts’ EPS being revised lower, if management hints at lower margins in the trading update.

The post Earnings preview: Royal Mail, Howden Joinery, Dunelm appeared first on The Motley Fool UK.

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John Choong owns shares of Dunelm. The Motley Fool UK has recommended Howden Joinery Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Boris Johnson’s Conservative government announced a new, Help to Build scheme late last week. The new proposal is meant to help Britons get onto the property ladder amid the increase in house prices outstripping wage growth. So, here are three FTSE shares that I think stand to gain from this new programme.

Grafton

Grafton (LSE: GFTU) is a FTSE 250 constituent, and could be a beneficiary from the Help to Build scheme. This is because, unlike Help to Buy, the new initiative won’t directly benefit property developers such as Barratt and Taylor Wimpey. The loan is only available for houses built by self-builders and custom builders. As the scheme is set to last until 2026, the group could end up benefiting from a long-lasting tailwind.

Grafton is a builders merchant that sells all sorts of goods required to build a house. These include building materials, timber, decor, DIY items, and pipes. Its manufacturing segment only accounts for 5% of its revenue, so I expect the business’ distribution segment to fair better from the new builds. Not to mention, its history of producing healthy profit margins makes it an attractive stock for me to purchase. However, it’s worth noting that the current cost-of-living crisis could hamper sales figures.

Breedon

Breedon (LSE: BREE) is the UK’s largest independent construction materials firm. It is listed on the FTSE AIM index. The company produced a combine 31.6m tonnes of cement and aggregates in 2021. But more importantly, the board expects further growth this year.

Constructing a new house typically uses more than a 100 tonnes of cement and aggregates. Therefore, I expect the Help to Build scheme to act as a tailwind for the FTSE firm. That being said, Breedon’s revenue doesn’t just stem from building houses. It paves roads and builds other infrastructure as well. Given how well the S&P Global/CIPS UK Construction Purchasing Managers Index (A measure of how well the construction sector is doing) has been performing, Breedon shares could improve in the long term. Its share price also currently trades at a decent price-to-earnings (P/E ratio) of 13, so I see this as a buying opportunity for me.

Dunelm

Inflation continues to run rampant. Thus, new home owners will be looking for bargains in furniture. Thankfully, FTSE 250 staple Dunelm (LSE: DNLM) provides exactly that. Its everyday necessities have an average price of £6, while its furniture has a low average price of £120.

Management has stated its goal of bringing better value proposition to its customers too. This is evident as Dunelm introduced more entry price products and promotional buys, which should entice more customers and purchases.

The retailer still has to compete with IKEA though, as its competitor offers cheaper products in certain categories. That being said, consumers still seem to prefer shopping at Dunelm. This is due to its excellent customer service, such as cheaper deliveries. On that account, as long as Dunelm can maintain its competitive prices and good customer service, I see it being one of the few FTSE shares riding the tailwinds of the new Help to Build scheme.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Dunelm (LSE: DNLM) shares are already down 40% this year. As economic headwinds continue to pick up, retailers are expected to face a decline in revenue and profits. As such, the Dunelm share price may plunge further into the red.

Retail sales tail off

Earlier this week, the BRC retail sales data showed a third consecutive month of declines. Consumers continue to cut spending amid the cost of living crisis, and it doesn’t seem that Dunelm is spared from this. The chief executive of BRC, Helen Dickinson, noted that high-value items such as furniture took the biggest hit.

The rising cost of living is going to remain the main story for retailers for the immediate future, with consumer confidence a key factor to watch out for.

Source: Paul Martin, UK Head of Retail at KPMG

As a result of this, analysts across the board slashed their expectations for the FTSE 250 firm’s future earnings. Dunelm was initially pencilled in for 1% growth this year. However, earnings are now expected to decline by 0.6% after a slew of negative economic data.

Sticking to old furniture

To make matters worse, Dunelm has plenty of other headwinds to contend with. Increase in house prices from a lack of supply means that there are fewer new homes available for people to move into. Moreover, the mortgage rate also saw an increase to 4.25% this week, hindering future home purchases. Additionally, inflation continues to run rampant at 9% on a year on year basis, squeezing consumers’ wallets even further.

How might all this affect the Dunelm share price then? Well, fewer new homes would mean less demand for new furniture and, consequently, less revenue. The lack of disposable income will then result in a slowdown in furniture spend, as evidenced in the BRC retail sales data. As such, I expect Dunelm shares to take a hit.

A new chair

On the flip side, Dunelm hired a new CFO this week in Karen Witts. Having held a number of executive positions at couple of other FTSE 100 companies, I am excited to see how Witts can further improve the company’s already robust balance sheet.

The retailer’s balance sheet is impeccable to say the least. Having no debt and healthy levels of free cash flow, Dunelm has more than enough firepower to combat a potential economic recession later this year. The company has also managed to increase its profit margins from 8.3% to 10.3% over the last two years. As such, I’m eager to see how the new CFO deals with a potentially declining top line to maintain its margins, while satisfying Dunelm’s goal to gain more market share.

With the furniture and home improvement sector having previously defied a declining retail sales trend, Dunelm may be an outlier in the current economic landscape as it offers excellent value for its products. Nonetheless, I remain dubious of its future outlook given the volatile and uncertain economic climate. Therefore, I’ll be waiting for its next trading update before deciding whether to invest in Dunelm shares. Instead, I’ll be looking to purchase other shares that could benefit my portfolio with more certainty.

The post Could Dunelm shares be in further trouble? appeared first on The Motley Fool UK.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Dunelm

Dunelm (LSE: DNLM) is a British home furnishings retailer that operates throughout the UK. It is one of the largest homewares retailers in the country with an ever growing market share. New director Karen Witts was appointed CFO this week and a number of Dunelm shares were awarded to her.

• Name: Karen Witts
• Position of director: Chief Financial Officer
• Nature of transaction: Free shares
• Date of transaction: 9 June 2022
• Amount purchased: 73,979 @ nil
• Total value: £N/A

Investec

Investec (LSE: INVP) is an international banking and wealth management group. It provides a range of financial products and services to a clients in Europe, Southern Africa and Asia Pacific. This week, a number of director dealings were carried out in both directions.

• Name: Ciaran Whelan
• Position of director: Director
• Nature of transaction: Sale to cover tax liabilities
• Date of transaction: 8 June 2022
• Amount sold: 24,037 @ £4.77
• Total value: £114,674.28

• Name: Ciaran Whelan
• Position of director: Director
• Nature of transaction: Partnership shares
• Date of transaction: 8 June 2022
• Amount purchased: 21,531 @ £4.77
• Total value: £102,702.87

• Name: Stephen Koseff
• Position of director: Director
• Nature of transaction: Sale to cover tax liabilities
• Date of transaction: 6 June 2022
• Amount sold: 31,514 @ £4.82
• Total value: £151,938.67

• Name: Ruth Leas
• Position of director: PDMR
• Nature of transaction: Sale to cover tax liabilities
• Date of transaction: 8 June 2022
• Amount sold: 10,179 @ £4.75
• Total value: £48,374.68

• Name: Ruth Leas
• Position of director: PDMR
• Nature of transaction: Partnership shares
• Date of transaction: 8 June 2022
• Amount purchased: 10,330 @ £4.75
• Total value: £49,092.29

• Name: Fani Titi
• Position of director: Director
• Nature of transaction: Sale to cover tax liabilities
• Date of transaction: 6 June 2022
• Amount sold: 75,150 @ £4.84
• Total value: £363,996.54

• Name: Nishlan Samujh
• Position of director: Director
• Nature of transaction: Sale to cover tax liabilities
• Date of transaction: 6 June 2022
• Amount sold: 37,885 @ £4.84
• Total value: £183,499.79

Bodycote

Bodycote (LSE: BOY) is the world’s largest provider of heat treatment and thermal processing services. The service acts as a vital link in the manufacturing supply. A non-executive director purchased a decent number of Bodycote shares this week.

• Name: Nicola Susan Boyd
• Position of director: Director
• Nature of transaction: Purchase of shares
• Date of transaction: 8 June 2022
• Amount sold: 3,000 @ £6.54
• Total value: £19,620.00

Types of shares in a SIP

To provide context, there are a few types of shares within a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to flexibly award equity to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this instance, the director dealings at Investec bought partnership shares. Employees can use a SIP to buy shares on a monthly basis or at the end of an ‘accumulation period’. If there is an accumulation period in effect, employees can buy shares at the market value at the beginning or end of the period.

The post Director dealings: Dunelm, Investec, Bodycote appeared first on The Motley Fool UK.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended Bodycote. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Going b(A)ck to (B)asi(C)s

Google’s parent company, Alphabet (NASDAQ: GOOGL) is one blue-chip that cannot be ignored. The conglomerate has a track record of beating the S&P 500, and produces stellar returns with a 30.2% return on equity. Alphabet earns the bulk of its revenue from advertising and search.

Its cloud segment is also starting to gain momentum as it races towards profitability. Given the firm’s dominance in these rather monopolistic industries, I believe Alphabet has what it takes to continue growing while holding a defensive position in my portfolio.

The blue-chip boasts an extraordinary balance sheet with close to zero debt and huge sums of cash. Its profit margins are that of a mining company, currently standing at close to 30%. With such an excellent track record and a forward price-to-earnings (P/E) ratio of 22, I’ll definitely be buying more shares. Although this evening’s earnings report could disappoint, I’m confident in Alphabet’s ability to generate long-term returns.

Dune forget Dunelm

One of Britain’s biggest homeware retailers, Dunelm (LSE: DNLM) has been largely overlooked since Covid restrictions were lifted. Many thought that the stock would dip as consumers opt to spend money outside of their homes. However, the blue-chip continues to impress. Its most recent earnings report showed a a 25% increase in its earnings, and total sales were up 10.6% year over year.

Even though recent GDP and retail sales numbers were lacklustre, Dunelm remains strongly positioned. The fine print within the retail sales figures showed that household goods stores saw a 2.6% increase in sales. With Dunelm’s 8.5% increase in active customer growth to go with that, the firm has strong pricing power to battle the inflationary storm. A forward P/E ratio of 13 and a decent dividend yield of 3% makes this stock an intriguing one to look out for, once the next set of retail sales data is released.

A saucy dip for this blue-chip

Rio Tinto (LSE: RIO) is one of the world’s largest iron ore miners. Its share price has taken a tumble due to recent disappointing Q1 production numbers and lockdowns in China. While I do expect the share price to continue dipping, I reckon there may be a buying opportunity sometime in May and beyond.

Mining companies are notorious for, “Using windfalls to dig more materials out of the ground. And the opposite is true when prices hit rock bottom. Production is reigned in and cash is conserved. These are the supply forces that self-regulate commodity cycles”, as FreeTrade analyst Paul Allison states.

Therefore, the blue-chip will eventually have an influx of demand for iron again, driving iron prices back up. This should happen once China eases its Covid restrictions. Buying shares before this occurs could possibly see my portfolio getting a bumper gain. Moreover, a 10% dividend yield could see me earning a little bit of passive income while waiting for iron ore prices to climb.

The post 3 blue-chip shares I’d buy in May appeared first on The Motley Fool UK.

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John Choong owns shares of Alphabet (Class A Shares) at the time of writing. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares) and Alphabet (C shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Despite many analysts’ predictions that the stock had exhausted its Covid tailwinds, Dunelm (LSE: DNLM) continues to report strong figures. Having said that, the stock is down 25% year to date (YTD). With fears of a slowing economy and cooling housing market, what’s next for the Dunelm share price? More importantly, could this be an opportunity for me to snatch up Dunelm shares on the cheap?

Sofa, so good

Despite the narrative that Dunelm was a Covid stock and that sales would drop back down once restrictions were lifted, the FTSE 250 company continues to impress. Its most recent earnings report showed a 25% increase in its earnings per share, with total sales up 10.6% year over year.

Dunelm’s gross margins also increased 0.8% as profit margins rose to 10.8%. Additionally, the company’s performance was so strong that it declared a special dividend of £0.37 per share, on top of the standard £0.14 dividend!

The homeware retailer also boasts a stellar balance sheet. It has a 0% debt-to-equity ratio with healthy cash levels. Pair that with a decent price-to-earnings (P/E) ratio of 14, and the Dunelm share price looks intriguing to me.

Dune and dusted?

Nevertheless, it’s worth noting that Dunelm faces substantial economic headwinds. Britain’s most recent GDP numbers were not bright, as the economy only expanded by a minuscule 0.1%. It doesn’t help either when the GfK consumer confidence number is reported to be at 2008 levels. Consumers are really starting to feel the heat of inflation on their wallets.

To make things worse, the increase in interest rates means there has been a decline in mortgage approvals, which would impact the Dunelm’s revenue. Fewer people buying new houses likely means fewer people buying new furniture.

However, all this data may not spell doom and gloom for Dunelm. While country-wide retail sales data for March showed a decline, the fine print showed that household goods stores saw a 2.6% increase in sales. In fact, compared to pre-Covid (February 2020) levels, retail sales were 2.2% higher.

This is backed up by Dunelm’s own figures, as it saw an 8.5% increase in active customer growth. I’d also make the case that Dunelm could stand to profit from a cooling housing market. This is because more people may be tempted to stay put and use their disposable income to improve their current homes instead.

Window of opportunity?

So, is the Dunelm share price trading at a fair level currently? Well, the Dunelm board is confident in its ability to navigate inflationary challenges. The firm expects second-half profits before tax to be in line with recently upgraded analysts expectations of £206m. The homeware firm’s long-term growth plans should see its share price rise, as its market share gains continue to outpace its rivals.

With its expansion into e-commerce and investments in its supply chain, analysts have given the stock an upgrade with an average price target of £15.52. All things considered, Dunelm does look very promising. Even so, I’ll be waiting for next month’s GDP and retail sales numbers before considering buying Dunelm shares for my portfolio.

The post Is the Dunelm share price a bargain? appeared first on The Motley Fool UK.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.