Barclays downgrades Kingfisher; expects 'bold moves' to improve competitiveness

As the market awaited the outcome of a key meeting on Greek bailout proposals that could decide the future of the eurozone, worries about trading conditions on the Continent hit blue-chip DIY retailer Kingfisher.

The owner of the B&Q chain in the UK saw its shares fall after broker Barclays downgraded its rating to underweight from equal-weight in a note saying it believes the firm’s new chief executive, Veronique Laury, will need to make some ‘bold moves’ to improve competitiveness.

The broker thinks the French woman, who only took the helm of the FTSE 100 company at the end of January, could undertake a programme of store closures together with price-cutting and investment in operating expenditure to try and achieve a viable margin for the B&Q business.

As a result, the broker said the company’s programme of cash returns ‘is at risk of being reduced or abandoned under these circumstances’.

Aside from major downside risks in the UK, the broker also expects a squeeze on profitability at Kingfisher’s operations in Poland due to the effect of a depreciation by the zloty on consumer spending.

Cutting its forecasts for the firm, analysts at Barclays said in a note: ‘We expect earnings estimates to continue being under pressure hence we expect shares to continue to underperform the market in line with negative earnings revisions.’

The broker also reduced its target price for Kingfisher to 270p from 285p, with its shares falling 7.1p to 340.8p.

Source : Jonathon Hopkins - ThisIsMoney.co.uk
www.thisismoney.co.uk/money/markets/article-2961816/MARKET-REPORT-Improvements-needed-B-Q-owner-Kingfisher-Goldman-downgrades.html