Halfords and N Brown share price drops after UBS downgrade, blaming Brexit, Amazon and currency woes

Kasmira Jefford
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Halfords has had its rating cut by UBS (Source: Getty)

Shares in Halfords and N Brown have dropped sharply today after analysts at UBS slashed their ratings for both retailers in a bearish note on the sector.

The Swiss bank's research arm, UBS Evidence Lab, has warned of on a whole shopping basket of challenges facing retailers this year, including short-term uncertainty over Brexit, wage inflation, currency and the increasing dominance of Amazon.

"We think Amazon growth has accelerated in 2015 after relatively lacklustre years in 2013 and 2014," UBS analyst Adam Cochrane said.

He estimates that Amazon accounted for a quarter of the total growth in UK non-food retail sales last year after winning more market share in categories such as clothing, homeware and expanding its "Prime" membership.

Meanwhile UBS said a survey of 2000 UK consumers it conducted in January also dampened its outlook for the sector, with three to five per cent more caution around spending than a year ago and only the lower to middle income brackets feeling slightly more confident.

"Given some of these macro and Amazon-specific concerns we think the sector is likely to de-rate by a further five to 10 per cent and hence we lower a number of price targets across the sector," he said.

The bank has downgraded the cycling and car services retailer Halfords to "sell" from "neutral" has cut its price target to 330p from 365p, sending shares down 4.7 per cent.

N Brown shares also dropped five per cent after its rating was cut to "neutral" from "buy", with its price target slashed from 380p to 360p. Debenhams and Marks & Spencer also had their price target slashed by 15 per cent and 10 per cent respectively.