Broker snap: Halfords estimates reduced but still a 'buy'

17th Jan 2011 12:52

While finnCap has reduced its forecasts for Halfords on the back of its recent disappointing sales performance, the broker has retained its positive stance on the stock as guidance on margins and costs are unchanged.The bike and car parts retailer's third quarter trading statement "was the latest in a series of disappointing announcements," says analyst David Stoddart, with retail like for like sales declining by 6.6%, leading to a total retail sales fall of 6.3%, worse than the 5% decline that the broker had assumed. Stoddart adds that the heavy snowfalls in December played a major part in causing the shortfall against expectations.The relatively high-margin category, car maintenance, increased sales by 12.1%, allowing Halfords to fund additional promotions in categories such as 'cycles' (in which it struggled in the third quarter) without reducing reported gross margin, the broker says.FinnCap has cut its pre-tax profit forecast of £129m to £127m and target price of 525p to 520p, but retained its 'buy' rating.