Numis highlights encouraging improvement at Mothercare

10th Apr 2014 09:53

Numis Securities has kept its 'hold' recommendation on Mothercare but highlighted an 'encouraging underlying improvement' at the baby products, clothing and toys retailer.The broker noted an improvement in trading for the company's international divisions, with all regions delivering like-for-like (LFL) sales growth in the fourth quarter.However, currency "took a turn for the worse", according to Numis, creating an 11.6% headwind during the quarter against the milder impact seen through the earlier part of the year.Meanwhile, conditions in the UK remain tough "but no worse than expected" with LFL down 0.3%."Mothercare reported an encouraging underlying improvement in Q4, leading to maintained 2014 [March year-end] forecasts, but the strengthening currency headwinds cause a modest erosion in 2015 estimates," said Numis analysts Matthew Taylor and Andrew Wade."The recent sharp fall in the share price leaves the valuation looking attractive on a sum-of-the-parts basis, but with earnings risk unlikely to have entirely passed and the senior management/recovery strategy yet to be clarified, we maintain a 'hold' recommendation."The broker's 175p target price was left unchanged.The stock was up 10.7% at 180.75p by 10:13.BC