Topps has lost more than half its value in the past three months as housing market fears and covenant concerns weigh heavy.
On Monday, Panmure Gordon cut its target price from 80p to 50p. The broker, which rates Topps a hold, acknowledged it “should be weathering the storm fairly well”, but warned: “The covenants associated with the£200 million share buy-back could yet strangle the company.”
Shore Capital analyst John Stevenson, advising buy, suspected that Topps’ management may renegotiate debt facilities before the autumn prelims.
He said: “It is worth pointing out this is not about the need for further funding – the group remains highly cash generative – rather, it is the need to avoid a technical breach of covenants.”
Stevenson concluded: “Topps is one of the few retailers we perceive to be oversold.”
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