We added Kingfisher (KGF) to our list of Great Ideas in February at 223.5p arguing the valuation afforded the B&Q and Screwfix owner did not reflect the self-help levers being pulled by the company and the potential for an improvement in the consumer backdrop.
WHAT HAS HAPPENED SINCE WE SAID TO BUY?
For a time, our call looked like a particularly good one as the company announced reassuring first-quarter performance in May and then robust first-half numbers in September which allowed the company to increase its outlook for free cash flow and pre-tax profit.
However, a strong run for the share price came to an abrupt halt with a third-quarter update on 25 November. Sales missed guidance, with the retailer suffering a 6.4% revenue plunge in its second largest market, France, prompting the group to lower the top end of its full year 2025 profit guidance.
The DIY group also warned rising national insurance costs on both sides of the channel, combined with a higher finance bill, will crimp full year 2026 earnings.
Although trading has picked up in the fourth quarter to date, Kingfisher said it now expects adjusted pre-tax profit of between £510 million and £540 million for the year to January 2025.
That represented a trimming of the previously guided £510 million to £550 million range. Free cash flow guidance of £410 million to £460 million was left unchanged and Kingfisher is on track to complete its £300 million share buyback programme in March 2025.
WHAT SHOULD INVESTORS DO NOW?
In hindsight it might have been prudent to book profit in Kingfisher ahead of this announcement but given the relatively modest impact on full-year guidance, we think the reaction to a slightly off-colour quarterly update is overdone.
We will keep a close eye on the company’s full-year results, likely to be released in March, and hope a more encouraging picture then can get the shares moving in the right direction again.
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Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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