Profit warning hits Premier Farnell value

Premier Farnell lost a fifth of its value today after it posted a profits warning because customers who stocked up after the Japanese earthquake had no need to shop for more electronic products since.

The firm said had built up strong inventories, and as a result sales growth for May and June was just 1.4%, much lower than its targeted range of 6%-8%.

The slump in demand was most pronounced in Europe and North America. In contrast, during the second quarter last year Premier Farnell saw growth of 30%.

"It is now apparent that significant inventory purchases were made in April and early May by customers to service their demand following the Japanese earthquake," the company said. "In light of the global slowdown this inventory is now likely to take longer to be utilised before purchasing returns to more normal levels.

"The board continues to believe that Premier Farnell will deliver profitable growth this year, albeit marginally lower than previous expectations."

Last month, the firm missed the City's first-quarter profit expectations, due to poor sales in its Asian division.

Today shares in Premier Farnell fell 22%, or 53.6p, to 190.5p.

"We already knew Premier Farnell's growth rates were slowing down. What is surprising is that they have deteriorated so much more, so quickly," said David Greenall, analyst at RBC Capital Markets.

"The shares have fallen a long way since its cautious, first-quarter update, but we see no immediate reason to buy them," added Andy Brown at Panmure Gordon.