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The retailer’s share price has been sliding since April – even though it posted a strong set of full-year numbers that came in at the top-end of estimates. Both Argos and Homebase registered rises in annual sales of 0.6% and 2.3% respectively, but Argos is still the bigger contributor to group revenue. In the past 12 months, Home Retail Group reported a 14% boost in full-year pre-tax profits and a 1% increase in sales.
As I mentioned previously, Home Retail Group went through a phase of profit warnings. The former CEO Terry Duddy drafted a restructuring plan, which is being carried out by the current CEO, John Walden.
It has now been two consecutive years that both Argos and Homebase have reported increases in yearly profit, and Mr Walden stated the ‘strategic plans’ of the company will help the company adapt to any changes in the retail industry. The 15% rise in dividend last year is proof that the days of lowering earnings forecasts are over, but Mr Walden is aware of the current financial climate and is anticipating low levels of growth.
Home Retail Group will announces its first-half numbers in October, and the market is expecting a revenue of £2.61 billion and operating profit of £9 million. The company will reveal its full-year numbers in April 2016, and dealers are expecting revenue of £5.76 billion and adjusted net income of £101 million. These forecasts represent a marginal increase in revenue and a 12% rise in adjusted net income.
Equity analysts are bullish on Home Retail Group, and out of the 20 recommendations, seven are holds, and four are sells. The average target price is 185p, which is 19% above the current price. Investment banks are less bullish on Kingfisher, and out of the 26 ratings, six are buys, 13 are holds, and seven are sells. The average target price is 352p, which is 7% below the current price.
The share price has been in decline since 2008 and 160p is acting as resistance, the recent low of 148p is the target to the first downside target, and a move through it will bring 140p into play. Heading back through 160p will bring the resistance at 174p into sight.