Challenging times for Kingfisher

Published:  29 November, 2010

LONDON: Kingfisher's ambition to become the global leader in the home improvement sector could be thwarted by "a nasty combination of external macroeconomic pressures and internal structural challenges in 2011," said Investec.

It is concerned about the outlook for the general retailers sector. The broker believes Kingfisher is "flying into a stronger headwind" and has a "sell" recommendation on the company. The broker is forecasting third-quarter retail profits of £255m, together with growth of 12%, down from nearly 16% in the first half of the year.

"The macroeconomic backdrop remains weak, therefore the longevity and success of Kingfisher's self-help measures remains important," it said, referring to the company's recent cost-cutting measures that have included a number of store closures in China.

Singer Capital Markets said that B&Q reported a 3.7% fall in like-for-like sales as part of its first-half update, largely because of the introduction of Kingfisher's TradePoint business.

The unit, which is aimed at the trade market and can now be found in a number of B&Q stores, should start to "contribute positively" to the company, according to the broker, and could produce "a swing factor of almost 3%".

Kingfisher releases its third-quarter update on Thursday.

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