Hering Hits Two-Month Low as Citigroup Cuts Rating to Hold

Cia. Hering (HGTX3), Brazil’s second- biggest clothing retailer, fell to the lowest in two months after Citigroup Inc. cut its recommendation to the equivalent of hold from buy.

Hering dropped 1.4 percent to 44.19 reais in Sao Paulo, the lowest closing level since Feb. 15. The benchmark Bovespa index rose 2.9 percent.

“The combination of current level of valuation and ‘not so exciting’ short-term results make us more cautious about the stock performance,” Carlos Albano, an analyst at Citigroup, wrote in a note to clients dated yesterday. “The company’s sales performance, which already reported meaningful deceleration in 2011, should decelerate even further” in the first quarter of 2012.

Hering’s sales rose 23 percent in the fourth quarter from a year earlier, down from a 43 percent increase in the first quarter of 2011, according to data compiled by Bloomberg.

The stock trades at 18.5 times Citigroup’s 2012 earnings estimates. That compares with a ratio of 18 for larger competitor Lojas Renner SA (LREN3), which also has a recommendation the equivalent of hold at Citigroup.

To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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