STOCKWATCH KarstadtQuelle lower on downbeat Commerzbank note 07.12.2004 10:39 Headlines FRANKFURT (AFX) - Shares in KarstadtQuelle AG were on offer in early trade after Commerzbank reiterated its 'underweight' stance and downside 5.50 eur price target on the stock, arguing that the retailer now has little control over its fate, dealers said. At 10.33 am, KarstadtQuelle shares were down 0.08 eur or 1.23 pct at 6.44, while the MDAX index was 1.76 points or 0.03 pct lower at 5,337.48. "In short, Commerzbank believes that KarstadtQuelle has lost control of its assets, its customers and its financials," the broker said after digesting the group's prospectus for its rights issue. The subscription period ends on Dec 18.
The broker said that KarsadtQuelle lost control of its assets after being forced to accept terms of a 1.75 bln eur syndicated loan from creditor banks, which was necessary to shore up the group's solvency. The broker said that there is very limited near-term earnings visibility at the retailer, while upside scope for the stock is limited following the equity offering. A strategic repositioning of the group is not likely to lead to striking earnings potential for the years to come, it added. "Commerzbank believes that a department store player like Karstadt has high costs, inefficient distribution with high levels of complexity and a weak image on prices, against competition that is very price aggressive (discount stores) or extremely fast (vertically-integrated apparel stores such as H&M and Zara)," the broker said. joe.brennan@afxnews.com jcb/hjp

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