In the opinion of Seymour Pierce Electrocomponents's flat sales growth in the second quarter of 2013 was a decent outturn given tough comps (+8% one year ago) and the global macroeconomic background. In particular, they believe that today's results showed that Electrocomponents is outperforming the market and its closest peer Premier Farnell.

To prove the above, they point out how market indicators, such as the Semiconductor Industry Association's (SIA) monthly billings numbers showed global sales were 1.9% lower in July (3 month moving average). Both the Americas and Europe were down 10%. By comparison, Electrocomponents reported flat sales in Europe, -5% in North America, -1% Asia Pacific and +5% in the UK (+2% excl Raspberry Pi).

Peer Premier Farnell reported a 3.3% sales decline in its 2Q13 (3 months ending August).

...but this came at a cost, they write

Group gross margin is expected to be 1.2% lower in the first half of 2013 given the increased use of customer discounts, changes in product mix towards lower margin products (e.g: Raspberry Pi) and adverse foreign exchange movements.

Even so, they add that: "Despite today's profit warning, we believe Electrocomponents is pursuing the right strategy, which will put it on a stronger platform to benefit from the upturn in the global economy whenever that may be," despite which -given the current uncertainties- they downgrade Electrocomponents from BUY to HOLD (Buy since 13 July 2012) with a 195p target price.

Shares of the electronics distributor finished the day as the worst stock on the market, down by 8.83% at the 200.3p mark, and at technical support.



AB

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