Spruce up your portfolio: three big British brands that could benefit from the DIY boom

The early May Bank Holiday is a crucial date in the home improvement market. This weekend, the British traditionally started renovating their properties in the hope of sunny days.

Households have yet to start investing in bistro sets for outdoor dining, benches and pots of paint, thanks to bad weather and budget pressures.

But investors looking to upgrade their portfolios will be interested to hear that the reluctance to spend money on projects big and small could be coming to an end.

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

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

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

Dunelm

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

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

Recently, the demand for ranges has decreased, and Dunelm shares have fallen by 9 percent in the past six months.

Yield: Dunelm’s dividend yield is 4%

But there are compelling arguments for taking a gamble at this level.

Simon Murphy, manager of the VT Tyndall Unconstrained UK Income fund, said: ‘The company has recently gained market share and we expect this growth to accelerate again as consumer confidence improves.’

He also points to Dunelm’s 4 per cent dividend yield, which could be as reassuring as a Dunelm Dorma featherweight duvet.

Next one

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

Next appears to have recovered faster than its peers from the decline in spending that followed the pandemic. This may be because the offer is ‘more adventurous’, as Lord Wolfson, the boss of Next, puts it.

Online at Next you will find all the basics, plus trendy items from smaller labels such as Rockett St George, whose quirky wares are not cheap. But Wolfson plans to deliver more aspirational merchandise while still offering value.

The next step is not to move to the more expensive market, but a ‘subtle shift in emphasis’, with more customers buying less, but buying better.

Next’s share price is up 33 percent in the past six months to 9092p. Goldman Sachs has set a target price of 10,700 pence, presumably based on the fact 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 supermarket chain Sainsbury’s.

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

Although Argos ranks seventh in the homewares market, Sainsbury’s puts a much greater emphasis on food in its Next Level plan, meaning Argos’ performance has been ‘disappointing’ in the eyes of analysts.

But this month, Sainsbury CEO Simon Roberts reported that customers are trading in their groceries, suggesting they may also feel like they can upgrade their homes.

Shares in Sainsbury’s have fallen 12 percent since the beginning of the year, which UBS analysts say could be an entry point.

Among those who could have big plans for Sainsbury’s are US private equity groups and billionaire Czech investor Daniel Kretinsky, who owns 10 percent of the company.