Insider: bargain hunters swoop on two struggling FTSE 250 stocks

A threat to dividend payments triggered an exodus at this mid-cap, but bosses clearly see value. City writer Graeme Evans also spots deals elsewhere near an eight-year low.

14th September 2026 08:53

by Graeme Evans from interactive investor

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Plans for a “bigger and bolder” Dunelm Group (LSE:DNLM) have received £92,000 of support after the retailer’s shares slid on expectations that the investment will mean a pause on special dividends.

Non-executive chair Alison Brittain bought 10,000 shares at a price of 732p, while senior independent director Ian Bull disclosed dealings worth £19,000 at 747.9p.

Their stake building took place the day after shares fell 14% on the back of Dunelm’s annual results and strategic update, which included a self-funded plan to accelerate top-line growth through the opening of up to 10 new stores each year and to refurbish another 50.

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Over the three years of the investment plan, ordinary dividend cover is expected to be slightly below the company’s target range of between 1.75 times and 2.25 times earnings.

Brokers Peel Hunt and Berenberg said they assumed no special dividends would be paid this year and next, which would end the company’s six-year run of surplus cash returns.

However, they reiterated their support for the FTSE 250-listed shares through continued Buy recommendations and price targets of 1,200p and 1,225p respectively.

Berenberg noted similarities to the approach of Marks & Spencer Group (LSE:MKS) as both companies have experienced some historical underinvestment in stores, logistics and technology.

The City firm said: “The investment for growth strategy at M&S took many years to bear fruit, but we think it could prove faster and more straightforward at Dunelm.”

Reasons for this include modest catch-up capital expenditure requirements, opportunity for low disruption and light-touch store refits and the company’s structurally higher underlying margin.

Peel Hunt added there was now a “blueprint to back” as it forecast an immediate re-acceleration of sales growth in the current financial year before earnings pick up in the second year.

Dunelm, which has 204 stores and generates 42% of its sales online, last week said that adjusted profits will be flat for a second successive year after trading in the first six weeks of the period was impacted by hot weather.

Sales in 2025-26 rose 3.1% to £1.8 billion, a growth rate that chief executive Clo Moriarty hopes to accelerate to mid-to-high single digits through her three-year plan for store investment and a revamp of ranges.

Moriarty said: “We are not changing the fundamentals of Dunelm - we are building on them with greater ambition. By winning more of our customers’ hearts and homes, we can create a bigger, better and bolder Dunelm for all of our stakeholders.”

The growth initiatives will be funded through cash generation and the removal of £100 million of “unproductive” costs.

UBS said Dunelm boasted one of the highest-quality business models in European retail, with a record better than Next (LSE:NXT) and Industria De Diseno Textil SA Share From Split (XMAD:ITX) in terms of 10-year median cash flow return on investment.

Highlighting a Buy stance alongside a price target of 1,130p, the bank said a current valuation of about 10 times forecast earnings looked compelling given this was the lowest level since 2019.

It also pointed out that Dunelm had the flexibility to support an attractive ordinary dividend yield of 6%, despite the planned step-up in capital expenditure.

Shareholders are next due to receive 28.5p a share on 17 November, part of a 2.2% increase in the total for 2025-26 to 45.5p. A special dividend of 25p a share was paid in April, which compares with the 35p a share of the previous two years.

Deutsche Bank, which is at 1,000p. added: “Despite the near-term noise, we believe the case for store investment is strong, based on Dunelm’s sector-leading 30% return on capital employed and a widening performance gap between stores.”

Safe to go bargain hunting

The long-serving boss of Safestore Holdings Ordinary Shares (LSE:SAFE) has spent £364,000 topping up his stake after shares in the self-storage firm slumped towards their lowest level since 2018.

Chief executive Frederic Vecchioli dealt shares on Wednesday at 551p, which is on a par with the multi-year lows seen in April 2025.

The FTSE 250-listed stock has fallen about 25% this year as European operators deal with inflation-driven cost challenges as well as house market and economic pressures.

Safestore said this month that UK like-for-like revenues rose 1.9% in the third quarter, supported by continued demand from domestic customers. The figure for its Paris estate fell 2.5%, offset by growth of 11.6% in its European expansion markets.

The overall growth rate of 1.9% in the quarter to 31 July compared with 3.5% in the first half of the year as Safestore said adjusted earnings per share were now likely to be in the lower half of City’s forecast range between 39.6p and 42.4p.

The group comprises 216 sites, including 141 in the UK and 36 in the Paris region.

With a significant proportion of planned expansion in the UK now delivered and in the occupancy ramp-up phase, Safestore said it was reviewing the phasing of its 2027-28 UK growth pipeline in the context of the current macroeconomic and interest rate environment.

Deutsche Bank said: “In our view, this reflects the weaker demand backdrop and increased financing and construction costs. If the pipeline is delayed, it could provide a short-term earnings benefit, but would reduce medium-term potential.”

The bank has a price target of 700p, while counterparts at Peel Hunt have an Add recommendation and 640p valuation.

Safestore was founded in 1998 before it bought the French business Une Pièce en Plus, which was set up by Vecchioli. It has been listed on the London stock market since 2007 and a member of the FTSE 250 since 2015.

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