Financial Trading Blog

Stock of the day 08/06/2016 – Home Retail Group PLC



It will likely be Sainsbury’s, rather than the company’s own, investors most interested in Home Retail Group’s first quarter figures on Thursday.


Having climbed above £1.80 by the middle of March (almost a 12 month high to the day), Home Retail Group plunged 10% on the 18th of that month following the news that South Africa’s Steinhoff International Holdings had signalled it was no longer going to provide an offer. Interestingly, even when Sainsbury’s threw its own bid into the ring later that day (post-close) the stock failed to climb back to those highs seen in the initial enthusiasm for a takeover.

After Steinhoff exited the M&A-arena Home Retail Group did manage a gentle rise, inspired largely by the acceptance of Sainsbury’s £1.4 billion bid at the start of April. Yet things began to turn lower as the end of that month approached, with the stock in part pushed lower by its full year figures.

Home Retail Group PLC Chart June 2016 Spreadex Financial Spread Betting
(Source: IT-Finance.com 08/06/2016)

Pre-tax profit plunged 28% to £94.7 million, with group sales sliding 1%. While the brunt of that sales decline came from the now Wesfarmers-owned Homebase (which slipped 3%), the Sainsbury’s-bound Argos hardly impressed, with sales flat for the 12 months to the end of February. That is an improvement in what had looked like an uninterruptable sales decline for Argos, but isn’t significant enough to convince those sceptical Sainsbury’s investors that the acquisition was a good idea.

More troubling news came at the end of May, with the CMA revealing it intends to investigate the Sainsbury’s/Home Retail Group merger due to its potential to cause a ‘substantial lessening of competition’ for customers (though one could argue Amazon already did that a long time ago). This sent the stock back below the £1.60 mark, a place it hasn’t spent this much time at since the middle of February. Home Retail Group has sits at a current trading price of £1.59 (IT-Finance.com, 08/06/2016).

As mentioned Sainsbury’s investors will be the ones carefully eyeing Thursday’s first quarter figures. Any further improvement in the Argos situation will go somewhat to soothing fears over the wisdom of the deal, while another sales drop may only exacerbate Sainsbury’s struggles (the supermarket dealing with its own declining revenue).

Home Retail Group PLC has a consensus rating of ‘Hold’ with an average target price of £1.47.

MARKET ANALYSIS

RECENT POSTS

DISCLAIMER


Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 64% of retail investors lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. For professional clients, spread betting and CFD trading can also result in losses larger than your initial stake or deposit.

Spreadex Ltd is authorised and regulated by the Financial Conduct Authority, provides an execution only service and does not provide advice in any way. Nothing within this update should be deemed to constitute the provision of investment advice, recommendations, any other professional advice in any way, or a record of our trading prices. This update does not constitute or form part of an offer of, or solicitation for a transaction in any financial instrument, nor shall it or the fact of its distribution form the basis of, or be relied on in connection with, any contract therefore. Any persons placing trades based on their interpretation of the comments or information within this update does so entirely at their own risk.

No representation, warranty, or undertaking, express or limited, is given as to the accuracy or completeness of the information or opinions contained within this update by Spreadex Ltd or any of its employees and no liability is accepted by such persons for the accuracy or completeness of any such information or opinions. As such, no reliance may be placed for any purpose on the information and opinions contained within this update.

The information contained within this update is the intellectual property of Spreadex Ltd and is protected by UK and International copyright laws. All rights reserved. Users may however freely download, distribute and reproduce extracts of the contents, subject always to accrediting Spreadex Ltd as the source and providing a hyperlink to machibet77.com.