Bonmarché PLC (LON:BON) shares fell over 20% after it sounded the earnings alarm, but is it now time to wade back into the market and buy?
Probably not, at least in the near-term, according to a couple of veteran retail analysts, who put research out in the aftermath of the warning.
Investec’s Kate Calvert said the stock is likely to “remain friendless” until new chief executive Helen Connolly articulates her strategy for the discount women’s clothing chain.
That said, Calvert repeated her ‘buy’ recommendation and 130p a share price target (current price 93p), suggesting that over the longer-term there is value there.
“We still believe Bonmarché operates in an attractive niche with self-help opportunities,” she said in a note to clients.
Cantor Fitzgerald analyst Freddie George cut his target price to 80p from 130p in the wake of the profit warning – which is 13p below the current share price.
He reckons Bonmarché lost momentum in the wake of its IPO last year.
“This news [the earnings alert] is likely to put the stock under cloud and it is unlikely to perform in the medium term, although it is relatively good value, and there is evidence of a recovery and a turnaround in sales,” he concluded.
Earlier Bonmarché said the summer was too cool and the early autumn too hot to shift its seasonal lines as.
That said, the late Sahara blast did have the upside of shifting some of the excess summer stock.
Trading in September was described as “extremely poor”. As a result underlying sales for the second-quarter of the financial year were down 8%, as were like-for-like revenues for the first half of the firm’s financial year.
Interim profits are likely to be in the order of £5-£7mln, Bonmarché said, compared with a pre-exceptional £6.4mln a year earlier. The dividend will be held at 2.5p.
There is a lot for new boss Connelly, previously the buying and design director at George at Asda, to get her teeth into.
“The direction of travel is right, but the effectiveness of execution needs to improve,” she said.
“My plans are therefore likely to focus on improving the clarity of the customer proposition and operational improvements in all channels rather than a major strategic repositioning.”