Broker snap: UBS upgrades Halfords but reduces targets

7th Jun 2012 09:38

UBS has upgraded its rating for car and bike parts retailer Halfords from sell to neutral after the recent sell-off but has cut its forecasts after a 'very disappointing' start to the current fiscal year."Current trading took the shine off a sensible strategy presentation that focussed on the main areas of Halfords differentiation. We lower our FY13 profit before tax by 5% to £78m and FY14 by 12% to £79m to reflect the weak start in Q1 and medium-term structural pressures," the broker said in a research note on Thursday morning.As such, the target price is cut from 260p to 240p.UBS still believes that Halfords has its challenges "but is not broken". After a turbulent few years, the broker says that the most recent strategic review is refocusing on the core business and its differentiation to mass merchants."Management has identified three key strategic pillars and is making the right long-term decision to invest in an improved service offering. This may create short-term earnings risk when combined with cyclical weather swings, but is the only way to ensure the brand remains relevant.""As a result of this medium term discipline, and current valuation pricing in some down side risk, we upgrade our rating."By 10:35, shares were trading 1.85% higher at 248.32p.BC