Kingfisher optimists trigger rebound

Richard Hunter, Head of Markets at interactive investor, commented “The song remains the same at Kingfisher, where performance varies by both business and by region.

Screwfix remains the jewel in the crown in terms of growth, whilst by geography Poland continues to make a worthwhile contribution.

Meanwhile, the strategic plan is still on track, with a simplified structure likely to lead to cost savings across the group. Gross margins should improve over the course of the year and Kingfisher (KGF)’s increasing reliance on Digital, now accounting for around half of sales, positions it well in the evolving technology environment.

In terms of shareholder returns, the buyback programme should provide some support, whilst the dividend yield of 3.7% is adequate given the current interest rate environment.

However, adverse weather across the period has had the impact of driving overall sales into the red. The UK and France, and within those regions the B&Q brand in particular, are continuing to find trading conditions to be heavy going and the so-called “Beast from the East” compounded the situation.

Source: interactive investor           Past performance is not a guide to future performance

With the exception of Poland, the outlook by geography varies between uncertain and volatile, although there is little to suggest at this stage that the full-year performance will be missed, since April and May saw some improvement.

Nonetheless, there has been enough uncertainty to put pressure on the performance of the stock, which has dropped 16.5% over the last three months alone.

During the last year a decline of 18% compares to a 4% hike in the FTSE 100 (UKX) and this latest update may inject further doubt as to Kingfisher’s prospects. Even so, the market view towards the company remains optimistic, with the consensus coming in at a buy ahead of the ongoing transformation.”

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation, and is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company’s or index name highlighted in the article.

Source.