Spruce up your portfolio: Three Great British brands that could benefit from DIY boom

The early May Bank Holiday is a crucial date in the home improvement market. This weekend the British traditionally set about smartening up their properties in the hope of sunny days ahead.

Households have yet to begin splashing out on bistro sets for outdoor dining, sofas and pots of paint, thanks to poor weather and budget pressures. 

But investors looking to buff up their portfolios will be interested to learn that the reluctance to commit money to large and small projects could be ending.

Nigel Yates of Axa Investment Managers senses the change in mood, saying: ‘We have an increasingly positive view on the UK consumer – thanks to falling inflation, tax cuts and robust employment trends.’

Such is the confidence that more of us are about to embark on a makeover that analysts at Barclays have raised their target price for shares in kitchen joinery maker Howdens from 900p to 1010p, against 880p at present. 

But other bets on DIY, furniture and furnishings are worth considering, and three other players could update a portfolio with style.

Dunelm

Nick Wilkinson, chief executive of the FTSE 250 home furnishings retailer declares that ‘everyone needs a bit of Dunelm in their life’ and he is on his way to this ambition, with 182 stores and an impressive online operation.

The chain, the largest player in the £3.64billion homeware sector, is described by Yates as ‘a high quality, well managed retailer’.

Lately, demand for ranges has softened, and Dunelm shares are down by 9 per cent over the past six months. 

Yield: Dunelm’s dividend yield is 4%

But there is a compelling case to take a gamble at this level. 

Simon Murphy, manager of the VT Tyndall Unconstrained UK Income fund, says: ‘The company has taken market share recently and we anticipate that this growth should start accelerating again as consumer confidence improves.’

He also highlights Dunelm’s 4 per cent dividend yield which could be as comforting as a Dunelm Dorma spring weight duvet.

Next

This £11billion company may be most associated with fashion. But its strength in homeware – it is number three in the market – is of one the reasons Next is considered a ‘high class act’ by Clive Black of Shore Capital.

Next appears to have recovered more quickly than its peers from the spending slump that followed the pandemic furnishing spree. This may be because its offer is ‘more adventurous’, as Lord Wolfson, Next’s boss puts it.

Online at Next you can find all the basics, plus hip items from smaller labels like Rockett St George, whose quirky wares are not cheap. But Wolfson intends to deliver more aspirational merchandise, while still providing value.

Next is not going upmarket, but a ‘subtle shift in emphasis’ is taking place, with more customers buying less but buying better.

Next’s share price has risen 33 per cent over the past six months to 9092p. Goldman Sachs has set a target price of 10,700p, presumably on the basis that this stock is the building block of a portfolio.

Sainsbury’s

This week marks the 60th anniversary of the founding of the great British brand Habitat, now part of the Argos division of the Sainsbury’s supermarket chain. 

Habitat, the brainchild of late designer Sir Terence Conran, helped form the national preoccupation with home and its decoration. 

Although Argos occupies seventh place in the homeware market, Sainsbury’s is putting the emphasis much more on food under its Next Level plan, meaning that Argos’s performance has been ‘underwhelming’ in the view of analysts.

But this month Sainsbury’s chief executive Simon Roberts reported that customers are trading up on groceries, which suggests they may also feel able to upgrade their homes.

Shares in Sainsbury’s have fallen by 12 per cent since the start of the year which analysts at UBS argue could be an entry point.

Among those who could have grand designs for Sainsbury’s are US private equity groups and the billionaire Czech investor Daniel Kretinsky who owns 10 per cent of the company.