Shares in Argos-owner Home Retail took a hit as broker Seymour Pierce switched its stance from hold to sell and argued a restructuring of the catalogue store business was likely.
The broker has cut its full-year forecast from £218m to £135m, which is at the low end of consensus estimates, in light of continuing tough trading conditions and the shift of sale away from stores to the internet. “It’s hard to see a reversal of fortunes for the group over the medium term,” said Seymour Pierce analyst Freddie George.
He believed a restructuring of Argos must be on the cards. Its balance sheet “is likely to become more stretched considering the fact that management will have to consider the possible closure of Argos stores, better returns from its product lines, which have crept to 23,000 from 18,500 in spring/summer over the past three years and a review of the twice-a-year catalogue model”.
He concluded: “Even if the stock has been oversold in the recent sell-off, we believe there are better investment opportunities elsewhere in the sector.”