James
Gard:
There
have
been
a
few
high-profile
profit
warnings
in
September
and
our
latest
stock
of
the
week,
Kingfisher
(KGF),
was
among
them.
The
DIY
specialist
cut
its
full-year
profit
forecast
and
shares
slumped
around
7%.
For
the
last
six
months,
retail
profit
was
down
nearly
a
quarter
amid
higher
costs
and
a
marketing
splurge
in
France
and
Poland.
Retail
is
a
hard
enough
sector
to
thrive
in,
unless
you’re
high
street
fashion
firm
Next,
but
there
are
different
dynamics
at
work
in
home
improvement.
Yes,
people
don’t
have
the
time
they
did
in
lockdowns
to
tinker
with
their
houses,
but
in
the
current
housing
slowdown
–
especially
in
the
UK
–
the
emphasis
is
on
“improve”
rather
than
move.
That
seems
to
be
backed
up
by
the
data,
as
the
UK
is
the
only
one
of
the
company’s
geographies
to
report
sales
growth.
So
things
may
not
be
as
bad
as
the
profit
warning
suggest.
Still,
the
owner
of
Screwfix
and
B&Q
is
now
relying
more
heavily
on
promotions
as
customer
budgets
get
stretched.
This
is
the
same
across
the
whole
of
retail
though.
Morningstar
analysts
have
cut
their
fair
value
estimate
for
the
shares
after
the
results,
but
this
puts
Kingfisher
in
undervalued
territory,
especially
after
a
near
10%
fall
this
year.
Shares
have
a
potential
upside
of
more
than
30%,
according
to
our
analyst
Matthew
Donen.
On
the
plus
side,
the
profit
warning
has
not
dimmed
the
company’s
plans
to
return
cash
to
shareholders;
the
dividend
has
been
held
and
a
£300
million
buyback
has
been
announced,
which
takes
recent
buybacks
to
nearly
a
billion
pounds.
For
Morningstar,
I’m
James
Gard.
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