Should you spend money on M&S, Dunelm or Next?

The British love affair with a home makeover is set to become even more passionate, or so retailers are calculating.

Some store chains, vying for a larger slice of the £14.3billlion market in furniture and furnishings, are hiring big names and ramping up their offers.

Marks & Spencer is launching a range designed by the renowned interior decorator Kelly Hoppen, amid what bosses call a drive to ‘bring our core home business forward’.

The new decor and kitchen ranges at John Lewis include saucepans and pasta pots from the collection devised by actor and cookery book author Stanley Tucci.

F&F, Tesco’s clothing division, is moving into homeware with 1,000 items of accessories, bedding, rugs and tableware at prices from 50p. 

The aim is to provide the latest looks to customers who have come into a store for groceries but are susceptible to an attractive array of household accessories.

Homeware is shaping up to be the new High Street battleground against a background of improving consumer confidence. 

Research from the consultancy Gfk reveals that households are starting to feel more confident about spending. 

Wages have been rising faster than prices over the past year, as inflation moderates and mortgage rates fall.

Also those who follow fashion in clothing increasingly want to reflect the latest styles in their interiors. 

Social media has raised awareness of what makes a home look dated and the products that ensure it is up-to-date.

Meanwhile, optimism has returned to the property market. The latest Halifax numbers show that prices are 4.1 per cent up over a year. 

When homeowners move house, they tend splash out on carpets, curtains and the rest.

Amazon and Ikea account for a chunk of domestic refurbishment expenditure, but a bet on the British listed companies could give your portfolio a revamp.

Dunelm

Dunelm is the most powerful player in UK homeware. Full-year results announced this week showed that it is continuing to snap up market share, although conditions remain ‘challenging’.

The medium-term aspiration is to control 10 per cent, truly becoming ‘The Home of Homes’. John Lewis and Ikea each has about 4 per cent.

One of Dunelm’s key strengths is what retail experts call its ‘wide price architecture’. You can buy a streamlined Scandinavian leather sofa for £2,600 or a ‘faux-leather’ smaller version for £469. 

This has helped it combat discounters and attract a clientele from ‘all age, income and geographic cohorts’, as boss Nick Wilkinson put it this week.

This year shares have gained 12 per cent to 1232p. Most analysts rate the shares a ‘hold’. But Cannaccord Genuity is a Dunelm enthusiast, targeting a further leap to 1325p.

Guy Anderson, co-manager of the Mercantile investment trust which holds a stake in Dunelm, highlights the management’s ability ‘to execute in a competitive environment’.

Next

Next, an £11.9billion multi-national member of the FTSE 100, is Britain’s pre-eminent retailer and a company regarded as a core constituent of a portfolio. 

Like Dunelm, Next is skilled at providing something for every type of makeover, whatever the budget.

You can choose between a smart serviceable sofa or the £1,399 leopard print number from quirky furniture label Rockett St George.

Thanks to these credentials, the shares have soared by 28 per cent since the start of the year to 10318.43p and are rated a hold by most analysts. Jefferies, however, has increased its price target for the shares to 11400p.

A dip in the shares could be an opportunity to buy because, as next week’s interim results are likely to confirm, the Next proposition is becoming ever more popular overseas. 

Jefferies argues that Next is transforming from a ‘proxy’ for the fortunes of the British economy into a ‘growth vehicle’.

Another reason to back Next is the size of the stake held by chief executive Lord Wolfson. He is the third largest individual shareholder and thus dedicated to further advances.

Marks & Spencer

Marks & Spencer has become the place to shop for the most stylish clothing, winning a younger clientele who previously regarded the chain as irredeemably frumpy.

The £7billion FTSE 100 retailer now wants to emulate this success in homeware, so boosting its market share from 1.5 per cent.

Bulky furniture no longer crowds out the home departments of stores. 

Instead, you can browse bedding, cushions, tableware and vases and pick up a throw from Hoppen’s range.

The transformation of clothing has driven the shares up 27 per cent to 351p this year, to the gratification of shareholders like me who suspected that M&S could replicate the appeal of its food on the fashion floor.

The shares are 80 per cent above their level of five years ago. 

Yet, they remain 18 per cent lower over a decade, and, as a result, analysts rate the shares a ‘buy’.

Tesco

Tesco is the UK’s largest supermarket, controlling 27.8 per cent of the grocery trade.

But the chain is always looking for ways to make us part with more of our money. 

The Tesco Finest range is being refined in a bid to rival M&S and Waitrose, and the move into homeware is another shift into highly affordable luxury. 

Tesco shares have surged this year by 24 per cent to 364p, aided in the last week by comments from UBS. The broker has set a target price of 400p, on the basis that Tesco’s profit margins could be set to widen.

UBS describes Tesco as a ‘versatile technology-driven company’, highlighting its ability to make the most of the data gleaned from its 21m Clubcard holders. 

If this information shows that this loyal band wants more cushions and cutlery, this will doubtless be supplied.

Sainsbury’s

Tesco’s assault on homeware will be closely watched by followers of Sainsbury’s.

The UK’s number two supermarket owns Argos through which it sells beds, sofas, rugs and pictures from Habitat, the iconic British interiors brand. 

Habitat is celebrating its 60th birthday this year. However, recent dismal sales at Argos mean that the division is seen by some as an ‘albatross around the neck’ of Sainsbury’s.

Could Tesco’s intervention spark a rethink? Maybe. Over the past six months, Sainsbury’s shares have jumped by 16 per cent to 290p.

Analysts are optimistic about the outlook, although based more on hope for more sales of groceries than homeware.

B&M

Shares in B&M, the FTSE 100 homeware discount chain, are down by 24 per cent to 426p this year, despite better-than-expected first quarter results which brought news of more store openings. 

There are already 741 in the UK and 124 in France.

The doubt surrounding B&M stems from its apparent disinclination to give sufficient guidance about how it intends to proceed. 

Previously, B&M benefited from shoppers trading down from more expensive chains.

Customers would stroll into a B&M to buy one thing but leave with a pile of stuff. This trend has slowed. But analysts are more sanguine predicting the share price could revive to 586p.

This, however, seems like a high-risk play on the homeware boom.