Newspaper article The Evening Standard (London, England)

Improvements Unlikely at B&Q Owner Kingfisher; MARKET REPORT

Newspaper article The Evening Standard (London, England)

Improvements Unlikely at B&Q Owner Kingfisher; MARKET REPORT

Article excerpt

Byline: MICKEY CLARK

KINGFISHER, owner of DIY retailer B&Q, has been the worst performer in the Footsie 100 index this year, and shareholders are being advised not to hold their breath if they are looking for an improvement.

The message from brokers is that there may be worse to come. The shares have slumped from a peak of 3161/4p since the start of the year and were hovering yesterday just a few pence above their low of 2081/4p.

Broker WestLB yesterday again cut its profit forecast for Kingfisher by [pounds sterling]20 million to [pounds sterling]460 million for the current year to January 2006, putting the shares on a prospective price-earnings ratio of 17. It has also reduced its 12-month target price by 15p to 210p.

WestLB retail analyst Peter Brockwell lays the blame for the Kingfisher downgrade firmly at the door of its B&Q operation in the UK. Following a store visit to Gloucester last week, Brockwell is predicting a near-halving of profits at B&Q to [pounds sterling]252 million in the current year.

He warns the DIY market is likely to experience a prolonged period of weakness, a view echoed by B&Q chief executive Ian Cheshire. He expects the DIY market to be down in 2006 with, realistically, few signs of growth showing through until 2007 at the earliest.

B&Q is not alone. The recent news from rivals MFI and GUS, which owns Homebase, has been grim.

Orders at MFI were down 31% and Homebase reported a marked deterioration in second-quarter sales.

Elsewhere among the retailers, brokers continued to ponder last week's numbers from struggling newsagent and bookseller WH Smith. Its shares nudged higher after US broker Smith Barney raised its recommendation on the shares from hold to buy and lifted its target price from 375p to 410p. The broker says: "Full-year results provided the quantum gross margin and cost removal guidance required to believe the group can deliver earnings growth despite the weak UK consumer".

The oil price received another boost from news of tropical storm Wilma, which is brewing up along the US Gulf coast and could develop into a hurricane and damage or disrupt oil production and refineries. …

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