Broker snap: Peel Hunt slashes forecasts for Carpetright

31st Jan 2012 10:45

Peel Hunt has maintained its hold rating and 400p target price on Carpetright but cut its forecasts following the carpet and flooring retailer's profit warning which sent the stock tumbling this morning.Carpetright has announced that full-year underlying pre-tax profit is expected to be below the lower end of forecasts "based on the current pace of sales and margin improvement". As such, Peel Hunt has slashed its full-year pre-tax profit forecasts from £11.9m to just £6m. Group sales fell 3.8% in the 12 weeks ended January 21st (fiscal third quarter), as falling UK sales (-4.8%) offset growth in Rest of Europe (+1.1%). Nevertheless, the broker did highlight that store like-for-like (LFL) sales growth had moved into positive territory."The outlook for Q4 remains equally tough, although with more stable pricing and increasing momentum from internal initiatives, Carpetright looks to deliver positive LFL sales momentum," said analyst John Stevenson.Meanwhile, Merchant Securities labelled the stock as a sell this morning, saying it was not surprised by the profit warning."The fragility surrounding housing transactions, weak sales from insurance replacement, increased competition from retailers such as ScS introducing a carpet division could be a threat and weak consumer sentiment do not bode well for the company," according to Merchant Securities analyst Amisha Chohan.Shares had dropped 8.18% to 567p by 10:44.BC