A poor first quarter performance hasn't troubled the rally in B&Q-owner Kingfisher (KGF) as the shares jump 3.9% to 340.7p. This continues a rising trend in the shares since February.
Admittedly, the shares were down at the market open today as investors were initially shocked at the large profit miss. Yet many analysts and investors remain fans of the stock, particularly in the hope that B&Q will benefit from increased spend on homes should the UK housing market start to recover.
Kingfisher also gave investors some comfort by saying that sales had improved at the end of the quarter following a return to 'more normal weather patterns'.
For the 13 weeks to 4 May, Kingfisher's profits slumped 28% year-on-year to £114 million, well south of the £144 million consensus estimate. Group like-for-like sales slid 4.2% as cash-strapped UK consumers stayed indoors amid cold and wet weather conditions throughout March and early April. This contrasted with last year when fine weather and an early start to the Spring season drove growth.
Sales at UK market leader B&Q fell 5.6% on a like-for-like basis to £913 million as March's cold snap curtailed sales of outdoor seasonal products. Kingfisher's performance in France also left lots to be desired, with Castorama and Brico Depot reporting same-store sales declines of 4.1% and 7.3% respectively. Fragile consumer confidence and bad weather impacted business across the channel, although a pick up in French housing starts augurs well for an improving sales trend as the year progresses.
Kingfisher's 'Other International' business, including China, Spain, Russia, Germany, Turkey and Poland, moved from a £7 million profit to a £2 million loss. Poland proved the main culprit as reinvestment in pricing crimped margins and consumers were put off by record cold weather there too.
Panmure Gordon reiterated its 'buy' rating and 350p price target for Kingfisher. Less bullish is N+1 Singer, with a 'hold' rating and 305p price target. It says the shortfall in core markets, including UK and France, may be 'harder to claw back. The broker adds: 'We therefore expect forecasts to come down by around 2% today, and perhaps for the perception of risk to increase given current weather is hardly brilliant.'
