HMV

20.12.06 : a full-year profits warning prompted brokers to slash forecasts and lower targets, with Seymour Pierce going as far as to cut its rating to 'underperform', dealers said. The music, games and books retailer said it forsaw full-year profits towards the bottom of the range of market expectations, adding it expects its product markets to remain "difficult" during the rest of the year. In reaction, Seymour Pierce downgraded its recommendation to 'underperform' from 'hold', cutting its 2007 pretax profit forecast to 70m and to 74m for the following year. The broker argued that the group's high yield may support the shares, although in the longer term it said it sees this company as one of "the Living Dead" category. "The company needs a huge strategic rethink which could result in major surgery to the store portfolio," Seymour Pierce told clients. Citigroup was also cautious, reiterating its 'hold' stance and saying it expects consensus forecasts for the year to April 2007 to fall by 15% to 70m following this statement. UBS meanwhile, reiterated its 'neutral' stance, although it lowered its target to 155 pence, from 165. "Much depends on the next couple of weeks, but it seems right to remain cautious on the competitive backdrop," UBS told clients.