Kingfisher shares in demand ahead of Q3 report

Investors are shopping for Kingfisher shares ahead of the DIY group's latest update on Thursday.

The owner of B&Q in the UK and Castorama in France will unveil news of its third quarter trading, and ahead of that analysts at UBS have issued a buy note with a 300p price target. The bank said:

We forecast third quarter pretax profit of £265m (consensus £255m), down 3% on last year. Group like for like sales are expected to be down 2%. In France, trading conditions are likely to have deteriorated. With the outlook into 2013 still difficult, margin and cost will again be the focus. Overall we think the risk to forecasts remains modestly on the downside but gross margin gains should accelerate from here.

At B&Q, we expect a 1% fall in like for likes and a return to gross margin growth after the weather-related impact in the second quarter. While recent mortgage lending data has been improving this will probably not help until 2013. In France, trading conditions are likely to have deteriorated, as per recent comments from Conforama. The new social tax credits could eventually reduce costs by around €30m with a staged benefit from 2014-15.

Macro weakness in France suggests the near-term forecast risk remains on the downside. However, from here, gross margin gains should accelerate, especially if plans to reinvest around 50% of supply-chain gains into the offer are reined back as a result of weaker market conditions and a general pullback in competitive activity.

Kingfisher shares are currently up 4.1p at 281.1p, making it the biggest riser in the FTSE 100.

Source : Nick Fletcher – Guardian.co.uk
www.guardian.co.uk/business/marketforceslive/2012/nov/23/kingfisher-ubs-buy-note-update