Broker snap: Carpetright warning prompts downgrades

23rd Mar 2010 12:36

A profit warning from floor coverings retailer Carpetright has prompted KBC Peel Hunt to downgrade the shares.Carpetright said like for like (LFL) year on year sales growth in the 7 weeks to 20 March was 1.4%, compared to the previous quarter's growth rate of 2.3%, and while some of that tail off can be attributed to the bad weather in the early part of 2010, the retailer has not seen a return to fourth quarter 2009 growth rates since the snow melted.KBC Peel Hunt had been expected a bounce back in trading, with the carpet seller continuing to benefit from the demise of Allied Carpets. The rebound has not proved as strong as anticipated so the broker has cut its 2010 profit before tax estimate from £37.5m to £27.8m, while the forecast for 2011 is chopped to £37.5m from £48.2m.'We remain confident that Carpetright will continue to benefit from new revenue streams and its dominant position in the market. However, we believe it is appropriate to take stock at this juncture in order to assess the on-going level of underlying LFL sales growth,' said John Stevenson in a note announcing KBC's profit forecast downgrades.The broker has cut the stock from 'buy' to 'hold' and cut the target price from 1,150p to 1,000p.