Broker snap: Citi still confident in full-year numbers at Halfords

21st Jul 2011 16:14

Despite Halfords' first quarter sales coming in below Citi's forecasts, the US broker maintained its buy rating on the car and bike parts retailer, saying that it does not expect consensus estimates to change significantly on the back of the statement.Like-for-like (LFL) sales in the 13 week ended 1 July fell by 1.1%, which implies an exit rate of around -5% over the last four weeks, according to Citi, which had anticipated sales to be flat on last year.Furthermore, Halfords also reiterated its full-year retail gross margin guidance of -100 basis points (bp), due to investment and mix effects. Citi, however, is a touch more confident and expects margins to fall by -90bp."First quarter LFL benefited from an additional bank holiday, later Easter and warm weather, however the weak exit trend implies underlying trading in retail remains weak. Following a rebasing of expectations and softening comparatives across [the second half], despite tough trading conditions our [profit before tax] forecast (c. 10% below consensus) looks underpinned," said analyst Ben Spruntulis.Citi said that Halfords is trading on a 2013 (year ending March) price-to-earnings ratio of 11.5, "in line with retail peers given its strong cash generation offset by short-term forecast risk".A 470p target price was maintained.Halfords' shares were trading 4.51% lower at 341.10p on Thursday afternoon.BC