Two leading City analysts are recommending investors sell shares in Booker – the UK's largest cash-and-carry wholesaler – as the firm posted another rise in sales.
Booker is 'the highest rated UK food retailer by a country mile', said Shore Capital
Analysts Clive Black and Darren Shirley of Shore Capital issued a 'sell' recommendation because of its high valuation.
The pair stated: "The stock has marched on by about 20% to new highs … and everything has a price … we continue to rate the stock a 'sell', purely on valuation grounds."
Booker, which has 170 locations in Britain, said that total sales had increased by 2.3% over the past three months. Over the past 12 months, sales have increased 3.5% to £4bn.
It is widely believed that Booker has profited from customers shopping in local convenience stores instead of supermarkets.
The FTSE 250-listed business supplies over 83,000 independent retailers.
Catering boom
The update also revealed that a boom in the catering trade had buoyed performance.
While sales to retailers rose by 2%, those to caterers increased by 6.2%.
Booker's other customers include grocers, pubs and restaurants. Over the year customer numbers have increased by 5% to 504,000.
Booker also has ambitious expansion plans. It has recently opened a third branch in Mumbai and last year snapped up Makro, German retailer Metro's UK outfit.
Although the Competition Commission has given the merger the green light, Booker has to hold the Makro business as a separate entity for now. However, the firm said performance at Makro had met expectations over the past three months.
Black and Shirley heaped praise on the firm, acknowledging the "paradox" between its performance and their recommendation.
'Highest rated'
"Booker is the highest rated UK food retailer by a country mile. We cannot deny that we struggle to find fault with ceo Charles Wilson's vehicle; the business has ticked every corporate box for some years and it is lovely to see good guys receiving their reward from the market.
"However, without structural upgrades we struggle to recommend the stock as anything but a 'sell' with the very high multiples – multiples that are likely to persist without a correction for some time."
Booker said in a statement: "The senior management of Booker and Makro remain confident that, by working together, we will be able to improve choice, prices and service for caterers, retailers and small and medium sized enterprises. We will be able to offer foods and non foods via the internet, delivery and cash and carry to an enlarged customer base. This will help the customers of both Booker and Makro to prosper."
Boss Wilson added: "In a challenging environment, Booker has continued to grow non-tobacco sales by 4.3% through improving customer satisfaction. We are into the final stage of the Competition Commission's review of the Makro acquisition and we remain confident that a combination of Booker and Makro will improve choice, prices and service for caterers, retailers and small businesses in the UK."
