Broker snap: Mothercare 'still too expensive' despite LFL beat

11th Apr 2013 13:58

The market may have reacted well to Mothercare's pre-close trading update on Thursday, but Panmure Gordon kept its 'sell' recommendation for the stock, saying that the shares are 'still too expensive'.The Mothercare group, comprised principally of the two retail brands Mothercare and Early Learning Centre, said that fourth-quarter UK like-for-like sales growth came in flat, better than analysts' estimates that ranged from -1.7% to 0.0%.The share price was up 7.88% at 315p in afternoon trade.However, as Panmure highlighted, total UK sales dropped 5.1%, missing the +1.1% forecast and international sales growth, while improved on the preceding quarters at 15.5%, missed the broker's 19.6% estimate.One positive element of the update was that Direct in Home online sales were up 18.2% year-on-year, much better than the 0.9% growth seen in the third quarter and Panmure's 9.3% estimate. The broker said that the market "is likely to view this positively".Analysts said: "The shares should go well today but, mindful of the fact that Q4 is far less important that Q3 for example, we continue to point to their premium to Dunelm and Ted Baker, both superior investment propositions in our view."Panmure said that Mothercare's valuation implies that the domestic operations will break-even by the year ending March 2015."We continue to expect that the UK business to will lose money over the next three years."BC