Broker snap: Panmure upgrades Mothercare on online potential

12th Jul 2013 11:24

Panmure Gordon has upgraded its rating for Mothercare from 'sell' to 'hold' ahead of its first-quarter trading update next week which should benefit from soft comparatives with last year.The broker said that one the key reasons behind it's previous 'sell' rating was the company's weakness online, given the disappointing UK Direct sales reported in the full-year results announced in May.Nevertheless, it now believes that "this cornerstone dynamic has started to change, as Mothercare product begins to turn up higher on Google search pages, based on our own research".The broker said that online sales should begin to "improve markedly".As for the first-quarter update due on July 18th, Panmure highlighted that the first three months were the weakest of last year in terms of like-for-like sales. This year, the broker expects full-year sales to fall by 2.5%, but first-quarter sales should be flat to 1.0% higher given last year's weak first-quarter outturn.Panmure said the upgrade comes "on the back of irrepressible momentum with respect to sporting and Royal Baby news, our perception that the online search facility is improving, and an emerging stronger UK consumer generally".The target price for the stock has been hiked from 280p to 420p.