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Fourth quarter trading update: Kingfisher continues to wade through the economic treacle, as consumers in its core European markets remain under pressure. The twin perils of a sluggish housing market and individuals' financial restraint do not play well for a company such as Kingfisher. In addition, the management outlook comments are reflective of a situation which is unlikely to change markedly in the nearer term. Even so, the company has been concentrating on refining the basics, keeping a tight control on costs and taking measures to protect margins. The additional focus on cash generation and delivering shareholder value has been well received, as evidenced by a small spike in the price in early trade. However, these difficult general conditions have been reflected in the performance of the shares over the last year, which have drifted 1%, as compared to an 8% gain for the wider FTSE100. The fact that the company is subject to the vagaries of being in a cyclical sector
Since the financial crisis began in 2007, B&Q owner Kingfisher (KGF) consistently generated profits and revenues ahead of expectations, and it was only the Great British summer of 2012 that saw the fundamental wheels start to come off. Indeed, until the middle of last year the retailer was one of the few High Street plays to really defy the downturn. Since then, Kingfisher’s emerging markets businesses have again boosted the bottom line, with the company’s Q3 report in November revealing a surge in revenues from new territories such as Russia. If this week’s trading update provides more evidence of the same, the near one-year consolidation for the stock between 270p – 290p could be broken to the upside.
Kingfisher: Morgan Stanley cuts target price from 290p to 270p, while reiterating an equal-weight rating.
from the recent buys. Might not be so cheap soon, and might have to raise my stop-loss!
"There is futher growth to come in Poland and Turkey and at its trade-oriented Screwfix chain in the UK. Mounting cash on the balance sheet makes some sort of share buyback likely in the 2014 calender year, with one optimistic broker suggesting a total of more than £1billion in 2014 through to 2016. This has helped to sustain the shares on about 13times earnings for the year about to end". This stock might never be as cheap to buy again.
I've made a lot on "doomed" stock at a cheap price over the years. I bought this one early today @278p. It's dipped just a little. After late news of (maybe) "tripple dip", I've decided to put a stop loss on this stock @ 270p - still giving it a chance to, if not gain, stabalize... If Osbourne should heed some of the top business people, and stop trying to imitate "Nero fiddling whilst Rome burns"... then peeps could find a little bit more in their pocket to spend... and maybe take up DIY again!
True, there's some evidence of margin resilience - the third-quarter retail profit margin rose slightly at the French and UK and Ireland divisions, although it slipped about a percentage point at the other international unit to 10.2 per cent. A prospective divided yield of over 3 per cent isn't bad, either. But the shares have risen 12 per cent since late July and now trade on 13 times Numis's earnings estimate for 2013 - leaving them rated in line with those of some better-placed retailers that are delivering reasonable sales growth, such as Halfords (HFD). As consumer weakness continues to hurt, those gains could easily be lost.......but as always dyor and gl
Trading was more mixed at the other overseas operations. Underlying third-quarter like-for-like sales in Poland, Spain and Turkey fell 7.3 per cent, 8.5 per cent and 4 per cent, respectively, but rose 3.5 per cent in China and an impressive 21.3 per cent in Russia. Don't place too many hopes in that robust Russian performance, however - just 4.7 per cent of Kingfisher's sales come from there. Overall, third-quarter like-for-like sales at the other international division dropped 0.8 per cent year on year. But Kingfisher is pursuing various self-help measures. Indeed, management announced in March that its self-help plan, called 'creating the leader', would deliver an additional £300m of annualised retail profit by its fifth year. It's an eight-point plan and includes such measures as upgrading the online offering and boosting the group's presence in its existing markets, while also expanding into new and developing markets. However, at the half-year stage, it emerged that this self-help effort had generated a £10m cost, reflecting the accelerated roll-out of commonly sourced own brands - so it could be a while before there's much sign of that targeted extra profit. In fact, the near-term earnings outlook appears distinctly unattractive - broker Numis Securities, for example, forecasts that adjusted earnings will fall 10 per cent in the year to the end of January 2013.
Kingfisher's business in France, responsible for 40 per cent of group sales, is struggling, too. Its Brico Dépôt operation, focused on trade professionals, was hit especially hard as French housing market conditions weakened - in particular, management notes that new housing starts there are falling. Accordingly, Brico Dépôt's underlying sales slumped 4.9 per cent at the third-quarter stage. Castorama coped better, with some strength evident in kitchen and joinery product sales - but its like-for-like sales still fell 0.9 per cent. Overall, Kingfisher's French underlying third-quarter sales fell 2.8 per cent and, with the IMF expecting the French economy to grow just 0.4 per cent during 2013 as eurozone-related woe continues to bite, don't expect radical improvements there any time soon.
Business is tough for Kingfisher (KGF), the operater of DIY retail outlets that include B&Q and Screwfix in the UK and Castorama and Brico Dépôt in France. True, last year's wet summer weather certainly helped keep Kingfisher's customers away. But with retail conditions still fragile - average wages are still falling, leaving consumers under ongoing pressure - Kingfisher faces bigger long-term challenges than mere weather fluctuations. That was clear from the retailer's latest sales figures. At the third-quarter stage, group like-for-like sales had fallen 2.8 per cent year on year. The group looks especially embattled in the UK and Ireland, where its B&Q chain generates a third of Kingfisher's sales. B&Q's third-quarter like-for-like sales to 27 October slumped 4 per cent on the same period last year. Admittedly, Screwfix's sales did rise 10.9 per cent, but generating 5.5 per cent of group sales, it's too small to have made much overall difference and third-quarter underlying sales in the UK and Ireland fell 3.8 per cent. Management blamed the "generally weak consumer backdrop in the UK and a particularly challenging environment in Ireland".
Kingfisher: Deutsche Bank lowers target price from 300p to 290p, while its hold recommendation is reiterated.
Home improvement retail company Kingfisher said Friday that its Chief Operating Officer, Euan Sutherland, who will be resigning from the company in March 2013, will step down from the board at the end of January, and remain an employee of Kingfisher until the end of March to allow for an extensive handover of his responsibilities. Sutherland, who only took up the role in February 2012, is leaving the company to take up the role of Chief Executive Officer at The Co-operative Group.
Kingfisher (KGF) Director name: Ms Clare Chapman Amount purchased: 6,990 @ 285.60p Value: £19,963
Kingfisher: UBS shifts target price from 290p to 280p keeping a neutral rating.
Kingfisher (KGF) Director name: Mr Euan Sutherland Amount sold: 5,263 @ 276.00p Value: £14,526
UBS has lowered its rating for B&Q and Screwfix owner Kingfisher from 'buy' to 'neutral' and reduced its target price from 300p to 290p, citing near-term risks. The broker said: "In most markets DIY demand remains depressed by a mix of low consumer confidence and weak housing markets, affecting big ticket and trade sales in particular. "While the UK may show some stability next year if mortgage lending improves, there are no signs yet that Continental Europe will follow suit."
RESEARCH ALERT-Kingfisher: HSBC cuts target price 30 November 2012 07:31, updated 30 November 2012 07:50 Nov 30 (Reuters) – Kingfisher PLC <KGF.L>: HSBC cuts target price to 340p from 350p; rating overweight
RESESARCH ALERT-Kingfisher: UBS cuts to neutral rating 30 November 2012 07:35, updated 30 November 2012 07:41 Nov 30 (Reuters) – Kingfisher <KGF.L>: UBS cuts to neutral from buy; target price to 290p from 300p
Following the company's results this is what analysts at Seymour Pierce had to say: "we continue to be concerned that the decline in fiscal year 2013 earnings is not just down to the one-offs of the extreme summer wet weather and the decline in the euro but is also structural. "The company has too much space for a multi-channel society while its stores are too large, difficult to shop and not aligned to the new trend for convenience. Gross margins have risen by over 3% points in both the UK and France over the last five years and, we believe, are likely to come under pressure as a number of initiatives approach conclusion."
Screwfix grew total sales by 10.9% to £149m, despite the continued challenging trading conditions in the smaller tradesman market. It benefited from the continued roll out of new outlets, the success of its 'click, pay & collect' scheme and a redesigned catalogue. Retail profit there was up 19.8% to £14m, boosted by strong sales growth, higher gross margins and cost control. In France like-for-like sales were drown 2.8%, but Kingfisher said it had outperformed the market. The firm's 'Other International' division saw total sales increase by 6.8% to £569m supported by new store openings and strong growth in Russia, now the second largest business in this division. However, with the exception of Russia, the uncertain European economic backdrop continued to impact like-for-like sales. Retail profit across the division declined 2.4% to £58m. B&Q China sales grew 2.6% to £96m - up 3.5% on a like-for-like basis - but its retail loss was £3m, mainly due to higher marketing costs.
DIY group Kingfisher saw revenue and profit creep up in the third quarter, as the company was boosted by sales in its new international territories, such as Russia. Revenue was up 0.8% at constant currency to £2.7bn, while retail profits on the same basis sneaked up 0.1%. However, overall, like-for-like sales were down 2.8%. In the UK, Kingfisher's biggest market, total sales declined by 0.7% to £1.05bn, and were down 3.8% in like-for-like terms. Retail profit grew by 5.5% to £59m driven by a higher gross margin and cost cutting. B&Q UK & Ireland's total sales fell by 2.3% to £906m, down 4.0% in like-for-like terms, reflecting the generally weak consumer backdrop in the UK and a particularly challenging environment in Ireland. Retail profit grew by 1.7% to £45m as the firm benefited from higher gross margins and operating cost efficiencies including lower bonus provisions.
Positive Points: Management reinforced confidence in its programme of self-help initiatives. 'Creating the Leader', will see the company emerge as "a world class retailer at helping customers have better, more sustainable homes". Unlike UK rivals, the group enjoys geographical diversification, including Emerging Markets such as China, Poland and Russia. The retailer is seeking growth in countries including Poland and Russia to help offset declines in Britain. Whilst sales in Poland were down 1.9% to £288 million and in Russia, where it benefited from new store openings, sales were up 40.4% to £126 million. Elsewhere, B&Q China sales grew 2.6% to £96 million driven by additional promotional discount activity. Screwfix grew total sales by 10.9% to £149 million, benefiting from the continued roll out of new outlets. Kingfisher has a successful track record with dominant strategic positions in the UK and France. Kingfisher has tried to offset weak demand in many markets with a drive to improve profitability by buying more goods centrally, and directly, from cheaper manufacturing centres such as China.
Negative Points: Retailers are suffering as consumers' disposable incomes are squeezed by inflation, muted wages growth and government austerity measures. The implications of the Euro zone crisis remain a concern. A continuing low level of housing transactions is also impacting on the home improvement sector. Potential moves into new markets, a target in the group's next growth self help programme, pose risks. Brico Dépôt, which targets trade professionals was impacted by the slower house building market. Total sales declined by 3.6% to £491 million. Changes in retail planning legislation could restrict Kingfisher's store opening ambitions.
Financial Highlights: A retail profit of £257 million was reported. Overall sales in the quarter dropped 2.8% to £ 2.7 billion. Adverse foreign exchange movements cost the group £16 million. Net cash as at 27 October stood at £222 million (28 July 2012: net cash of £29 million) reflecting peak trading patterns, tight cash control and some capital expenditure projects now scheduled to fall in the next financial year.
Third quarter trading statement: Kingfisher's markets remain challenging Europe's largest home improvement retailer announced a 6% drop in third-quarter profits, hurt by a fall in sales in its main markets in the UK and France, and the impact of unfavourable foreign exchange movements. Kingfisher reported a retail profit of £257 million in the period that compared to £273 million in the same quarter last year and an analysts' average forecast of £255 million. Retail profit was adversely impacted by £16 million due to translating Euro and Polish zloty profits into sterling. "Our markets remain challenging, with consumer confidence still weak and so we maintain our strong focus on margin, costs and cash," said Chief Executive Ian Cheshire.