Broker snap: Singer scales back forecasts for Home Retail

9th Sep 2011 12:30

Singer Capital Markets has slashed its target price for FTSE 250 retailer Home Retail Group by 29%, after the group's first half results showed continued tough trading at Argos and a challenging second quarter for Homebase.Shares rose on Thursday after the group reported that while Argos - which is by far the bigger operation - registered a 7.1% decrease in sales to £859m, on a like-for-like (LFL) basis the rate of decline slowed to 8.6% from 9.6% in the first quarter. Homebase, meanwhile, saw a decline of 3.1% in LFL sales to £382m, having seen LFL sales grow 1.6% year-on-year in the preceding quarter. "Whilst not as bad as feared the continued weakness of trade at Argos and our concerns about exposure to an increasingly cash strapped consumer prompts us to downgrade estimates by 12% in the current year and by 18% next year," the broker said.As such, the target price is cut from 133p to 95p and the broker maintains its sell rating, saying that it remains cautious on earnings prospects "given the group's exposure to the UK mass market customer, the continuing squeeze on spending and competition."By 12:23, shares in Home Retail were 5.94% down at 110.80p.BC