Broker snap: Nomura cuts estimates at Home Retail

10th Jun 2011 11:26

Nomura has pulled back its target price for Home Retail Group by 20p, on the back of margin pressures and concerns at its Argos chain.The Argos and Homebase owner reported a "disappointing" first quarter, according to the Japanese broker, in which like-for-like (LFL) sales declined sharply (by 9.6%) and gross margins fell by 75 basis points. These were driven by a poor TV and video gaming sales, which were down over 20%."We see ongoing negativity in consumer electronics, while our concerns around product positioning and demographics at Argos remain," Nomura said.The broker now thinks that full-year LFL sales will show a 6% decline, down from a previous estimate of -3%."Our key concerns around Argos remain product positioning and pricing, and exposure to lower consumer demographic customers."A 'reduce' rating is kept, while the target price is reduced from 180p to 160p.---BC