Dunelm share price prepares for a strong move ahead of earnings

July 18, 2023 09:01 AM PDT | By Invezz

Dunelm share price prepares for a strong move ahead of earnings — Image source: Invezz

Cost of living crisis

Dunelm is a leading British retailer that focuses on home items. It has 177 stores in the UK and over 11,000 workers. Therefore, like other companies in the industry, Dunelm is going through major challenges.

The most important challenge is the ongoing cost of living crisis, with the UK having the highest inflation rate in the G7. Data published in June showed that the country’s inflation stood at 8.7% in May.

Homeware products tend to underperform in a period of high inflation since most people focus on staples like food, transport, and accommodation. This explains why similar companies like Williams-Sonoma have underperformed the market.

The next important catalyst for the Dunelm share price is the company’s earnings scheduled for Wednesday. Analysts are optimistic that the company did well in the period even as inflation pressures continued. They cite the fact that Dunelm is one of the few retailers that expanded market share.

Precisely, analysts believe that the company’s revenue rose to 1.63 billion pounds in the financial year, representing a 5.1% YoY growth. They also believe that the profit before tax (PBT) came in at 188 million pounds. In a recent note, analysts at Peel Hunt said:

“We continue to believe that Dunelm is recruiting customers from all areas of the demand spectrum, including department store shoppers attracted by its value offering at all price points.”

Dunelm share price forecast

Dunelm stock peaked at 1,230p on March 7th of this year. It then retreated and bottomed at 980p on July 7th. On the daily chart, the stock is trading at an important level, the lowest level on April 6th. It has moved below the 50-day moving average and the dots of the Parabolic SAR.

At this point, the outlook for the stock is neutral and could move in either direction after earnings. I have a bullish bias on the stock because of the expected market share gain. If this is correct, the next level to watch will be at 1,100p.

The post Dunelm share price prepares for a strong move ahead of earnings appeared first on Invezz.

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