FTSE edges above 7,500 on hopes that coronavirus is nearing peak, and Dunelm’s golden period continues

“With data from China providing some hope that the coronavirus outbreak may be reaching its peak infection rate, the markets started Wednesday in a positive mood,” says AJ Bell Investment Director Russ Mould.

“The FTSE 100 has clawed its way past the 7,500 mark after gains in the US and Asia overnight.

“However, market confidence could be tested as the full economic impact of the outbreak becomes increasingly apparent.

“Notably investment bank UBS has cut its forecast for Australian first quarter GDP and is now pencilling in a fall."

Dunelm

“It has been something of a golden period for Dunelm. Not only did it rise above the retail blues last year with impressive trading but more recently it has managed to roll out a new technology-based project without messing it up.

“Half year results illustrate just how successful the company has been. It is generating more sales and profits and paying shareholders higher dividends. In a sign of retail power, it is managing to get customers to buy lots of stuff without having to resort to heavy discounting.

“And for all the chatter about people no longer going to the shops, it reports ‘positive footfall’ which suggests its stores still offer enough appeal to drag people out of bed to see the products in person.

“A pick up in house prices in January should benefit Dunelm as it suggests stronger activity in the property market. Moving house is a good excuse to buy new bedding, curtains and furniture, all of which is the domain of Dunelm.

“Its new digital platform is making it easier to buy stuff online and also driving click and collect transactions – another catalyst for getting people to visit stores as they pick up orders made online.

“The business is clearly on a roll yet it must be noted that Dunelm’s products aren’t everyday essentials that need regular replacement. Consumers experiencing more difficult economic conditions could easily get by without having to buy a new quilt or a new set of saucepans. Therefore deterioration in economic conditions could easily cause a nasty blow to the company.

“Its share price has more than doubled since the start of 2019 as new energy is breathed into the business. The stock has today hit a new record high following the half year results. It definitely deserves a pat on the back, yet expectations are now so high that Dunelm can’t afford to make any mistakes.”

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