STOCKS NEWS EUROPE-Dunelm hit by profit takers after Q3

Shares in Dunelm (DNLM.L) drop as much as 6.6 percent to 255.25 pence as investors take profits on their approximate doubling in value after the British home furnishings group reports a solid third-quarter trading update.

While a 2.3 percent rise in like-for-like sales in the 17 weeks to April 25 was ahead of some analysts' expectations, and up on the rate reported in the first half, it was down on the 4.4 percent increase posted for the first 8 weeks of the second half.

"Dunelm has significantly outperformed the broader non-food like-for-like trends of 1Q09 of circa -4 percent," Citi analysts say. "However, with the 2009E P/E now standing at c16x (on consensus numbers), the upside to the valuation at this point appears limited."

Numis analysts nudge up their 2008-09 and 2009-10 profit forecasts to 51.2 million and 52.1 million pounds respectively, but are disappointed the group has not signed any further leases for new stores and trim their investment rating to "add" from "buy."

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