Broker snap: Carpetright overvalued after profit warning

1st Feb 2011 10:20

Carpetright's disappointing trading update reinforced finnCap's view that, for some time, the group's valuation has been based on an outlook for revenues that was "simply too optimistic."The specialist carpet and floor coverings retailer announced on Monday that in the 13 weeks ended 29 January, UK and Republic of Ireland sales declined by 5% with like-for-like sales down 7.7%.While UK margin remains on track, Carpetright said that International sales were down and expects profits for the 12 months ending April to be below the prior year.Analyst David Stoddart says that "to reflect the weaker-than-expected revenue performance," pre-tax profit forecasts for 2011 and 2012 have been reduced by 16.4% and 16.2% respectively.The broker keeps its 'sell' rating and cuts the target price from 485p to 420p.