Kingfisher (KGF) 313p

Gain to date: 40%

We recommended buying into home improvement retailer Kingfisher (KGF) back in February at 223.5p on the basis of valuation (a single-digit price to earnings multiple and 5.5% dividend yield) and the potential for gains on the back of self-help measures and improving UK consumer confidence as interest rates come down.

Although Kingfisher shares are just off their recent 12-month highs, we believe there is scope for further re-rating as the firm’s European businesses stabilise.

WHAT HAS HAPPENED SINCE WE SAID BUY?

In its first-quarter trading update in May, the company posted a small increase in like-for-like sales as market share gains for B&Q and Screwfix in the UK and an improving trend in Poland offset expected weakness in France, leading the board to reiterate its full-year guidance for pre-tax profit and free cash flow.

In September, the group released first-half results which showed sales down slightly in the UK, Ireland and Poland due to poor weather, and continued softness in the French market, but broadly it still managed to gain share.

Notably, online sales showed a marked increase and strong management of the gross margin (meaning fewer promotions) together with cost and inventory control meant the firm was able to raise its pre-tax profit and free cash flow outlook for the full year.

WHAT SHOULD INVESTORS DO NOW?

With positive signs of a housing market recovery in the UK, we believe Kingfisher is well-positioned for growth this year and next year and once sales in France stabilise we should see a further improvement in earnings and cashflow.

Based on the consensus estimate of 25p of EPS (earnings per share) for the year to January 2026 and our belief the shares can get back to a multiple of 15 times, we get a target price of 375p meaning there is still plenty of headroom left.

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