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Broker snap: Mixed signals from Home Retail
Wed, 08 Feb, 2012
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Broker snap: Mixed signals from Home Retail
Fri, 12 Mar 2010, 12:56:00
Results from Homebase and Argos owner <b>Home Retail Group</b> 'posted a mixed but incrementally positive fourth quarter update' according to Numis Securities, but the broker thinks the group will be 'challenged to make progress in 2010/11.' Like for like sales (LFL) figures from Argos were weak but the performance of Homebase compensated for this. 'The LFL performance of Argos should be viewed in the context of a sequential quarterly comp [comparative] c.6%pts tougher, a 3%pt impact from a later catalogue release, and a c.3%pt hit from the snow,' the broker notes. 'Homebase LFLs surprised positively as the retailer managed to clear a delivery backlog (c.+5/6%pts in a low volume quarter) despite the in-store impact of the snow (c.-3%pts),' Numis added. The broker has kept its 'hold' recommendation on the stock and 260p target price. 'The group surprised positively by guiding to a YE net funds position of £410m (previously £385m). However, with timing reversals in working cap, higher capex and newly agreed pension contributions we now expect net funds to be broadly flat to Feb-11F [fiscal year to February 2011],' Numis concluded.
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