Bonmarche slides after cautious outlook

Shares in Bonmarche slid on Friday after the retailer said full year pre-tax profit will be at the lower end of guidance.

Back in December, the company said pre-tax profit would be between £10.5m and £12m.

Total sales were up 5.3% for the year ended 26 March, while like-for-like sales rose 0.7%, or 1% including online.

For the 13 weeks ended 26 March, total sales increased 5.2%, with LFL sales up 0.4% or 0.5% including online.

The comparable figures for the fourth quarter of the previous financial year were 4.7% for LFL stores only, and 3.3% for LFL stores plus online.

Chief executive officer Beth Butterwick said trading conditions were likely to remain challenging, hence the cautious outlook for the full year 2017.

“Post-Christmas, trading conditions have continued to be quite challenging, with the exception of January where we saw a higher than average demand for autumn/winter sale stock. Although helpful in clearing these ranges, the continued colder weather has been unhelpful in kick-starting real demand for spring products,” Butterwick said.

“Overall, consumer confidence does not appear buoyant and, given that context, I believe that the provisional results represent a creditable performance. Our financial position continues to remain healthy and our final autumn/winter terminal stock position has ended better than expected, and lower than last year.”

Peel Hunt said the update was “disappointing” and highlighted a poor fourth quarter.

“Bonmarche shares only trade on about 10x PE but will probably find today tough. We continue to believe that the recovery story at M&S is one of the better ways to play the retail sector right now,” Peel said.

“Bonmarche shares only trade on about 10x PE but will probably find today tough. We continue to believe that the recovery story at M&S is one of the better ways to play the retail sector right now,” Peel said.

Investec said that despite challenging conditions through the fourth quarter, it is reassuring that management expects to achieve its pre-tax profit guidance range.

The brokerage cuts its price target on buy-rated Bonmarche to 220p from 245p and downgraded its FY16 and FY17 pre-tax profit estimates by 2.5% and 7% respectively, reflecting a more cautious outlook by management, similar to both Next and M&S.

At 0947 BST, Bonmarche shares were down 10.6% to 168p.