Welcome to Morningstar.
Our latest stock of the week is Kingfisher, the owner of B AND Q and Screwfix. The do it yourself specialist has just released annual results covering some of the period when the UK was in lockdown.
Stuck at home during the pandemic, people embarked on improvement projects. Stores like B AND Q stayed open because they were classed as essential retailers. The company’s results show a 33% increase in pre-tax profits, and some of that uplift is due to the lockdown boost. But Kingfisher warned that profits are likely to be lower in this financial year as demand for DIY fades. Inflation is raising the costs of materials, but our analysts think Kingfisher will have to reduce prices to lure customers back in. With input costs rising and retail prices falling, this is likely to put pressure on profit margins. Still, the UK is expected to remain one of Kingfisher’s stronger markets because of loyal trade customers who spend more and more often.
Shares are down 25% so far this year and weakened further after the results. This means they are now trading below their value, according to our analyst Matthew Donen. He says that Kingfisher’s balance sheet remains healthy, and that has supported a 50% rise in the dividend year on year. Kingfisher, like many other FTSE companies, is involved in buying back its shares.
For Morningstar, I’m James Gard.
