- Kingfisher
- 02 May 2024 15:40:20
Source: Sharecast
The bank said Kingfisher continues to work on improving its offer, and has the opportunity to transfer best practice in areas like trade and digital from the UK to other markets.
However, RBC said it was relatively cautious on the outlook for France and consensus earnings near term, and that it currently sees more valuation upside potential for some other UK retailers such as B&M European Value Retail.
RBC said that in an environment of lower overall inflation, it reckons it will be more challenging this year for some retailers to offset further inflation in staffing, their biggest cost line. It noted that the minimum wage is rising by 9.8% this year in the UK and 21% in Poland.
"We expect KGF to drive labour and productivity initiatives, such that its wage impact will be less than this. However, with another likely subdued year for housing activity and LFL sales, we're not expecting KGF to see meaningful profit growth until 2025," it said.
RBC also pointed out that the French home improvement market, where KGF has a number two position, has been soft in recent quarters, and said it thinks it will take time for consumer concern over macro factors to ease.
"Castorama in our view remains somewhat stuck between more experiential and more convenient offers, and we expect it to accelerate pro and digital initiatives e.g., marketplace," it said.
"Brico Depot looks better positioned long term with its discount heritage, and should benefit now from an increased focus on in-store availability and marketing."
RBC maintained its 235p price target on Kingfisher.
At 1000 GMT, the shares were down 2% at 220.70p.
