Prior concerns: We had previously been concerned that Dunelm’s strong performance during the pandemic (sales are up over 40% since FY19) would prove short-lived, with demand likely being pulled forward from outer years. With Covid restrictions easing this year, we further worried that consumers would start to switch spending back to leisure categories. Such a trend appears to be evident at other home and furniture retailers – we note several high-profile profit warnings recently, including Made.com, Maisons du Monde, Westwing, Home24 and Procook. Yet Dunelm appears to be bucking the trend, given FY22’s performance - especially in Q4 (and in current trading) given tough comparatives and a challenging macro-economic backdrop. It is clear that Dunelm’s run of consistently winning market share has continued, signalling that its proposition is more robust than we had feared. PBT also points to a strong margin outcome this year: with FY22 PBT expected to be c. £210m, Dunelm is likely to have achieved its best margin performance in 6 years – despite inflationary headwinds arsing in H2 and elevated online penetration levels - now at 35% (versus 20% in FY19) - which we had previously worried would dilute margins at the contribution level. Forecasts and valuation: We make small changes to our forecasts reflecting growing margin pressures building next year as well as factoring in softer top line growth in FY23E. We still believe that there is a risk to consensus forecasts - which assume top line growth of 4% to 5% p.a. (FY22 – FY24 CAGR). However, the valuation is now on a historically low multiple at just 11.5x FY23E PE implying material downgrades are expected - which may prove to be too pessimistic an assumption.