Are shares in B&Q owner Kingfisher set to fly south?
The Kingfisher [KGF] share price has dived 29.7% this year as hard-up customers have postponed home improvements amid the cost-of-living squeeze.
Shares in the B&Q owner, which also owns Screwfix and European DIY superstores such as Castorama and Brico Dépôt, topped 375p in 2021 when Covid lockdowns led housebound consumers to splurge on doing up their homes.
However, revenue and profits have fallen this year against those tough comparatives. Like-for-like sales in the six months to the end of July came in at £6.81bn, down 4.1% versus the year-ago period, while adjusted pre-tax profit fell 29.5% to £472m.
Anxious investors may also be concerned about rises in interest rates and mortgage rates. The consequent slowdown in the housing market is likely to deal a further blow to DIY retailers, which tend to fare better when the property market is buoyant.
These challenges seem set to be among the key talking points when Kingfisher announces its Q3 results on Thursday.
Stock rebound meets resistance
After hitting a two-year low of 198.6p during intraday trading on 21 October, shares in the FTSE 100-listed company rose 23.9% to close at 246.1p on Friday 18 November.
But this recovery could prove short-lived, according to our chief market analyst Michael Hewson. “The rebound off the October lows appears to have run into resistance just below the 200-day simple moving average, which is a key barrier to further gains ” said Hewson with reference to the chart below.
Kingfisher stock price, 2022 to dateSource: CMC Markets
“With consumer confidence close to record lows, the key question now is whether this week’s numbers can offer enough optimism to drive further gains,” added Hewson.
Consensus estimates point to possible share price fall
Analysts appear doubtful about the prospect of further gains. Among 20 analysts polled by the Financial Times in November, no analysts gave the shares a ‘buy’ rating. There were three ‘outperform’ ratings, while 10 analysts said ‘hold’, six went for ‘underperform’ and one rated them a ‘sell’. Among the 16 analysts offering a 12-month price target for Kingfisher, the median estimate of 243.5p represented a 1.1% decrease on Friday’s closing price of 246.1p.
Although Kingfisher’s like-for-like sales are up compared to the last pre-pandemic year of 2019, the business faces near-term headwinds that could weigh on the share price. Kingfisher stock could come under particular pressure if the Q3 results – due out at 7am on Thursday 24 November – underwhelm the market.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.