Kingfisher shares extend gains as French business almost fixed

Could Kingfisher finally have nailed a turnaround?

Market applauds a good job in Q1

The market immediately applauded its first-quarter trading statement on Thursday by pushing Kingfisher stock more than 3% higher.

Investors welcomed the first signs that the firm might be stemming a long-standing decline of its businesses in France.

Also that KGF’s best-performing retail operation, the trade supplier Screwfix, continued to mesh well with a healthy UK maintenance and refurbishing sector.

France, long the weakest point of Kingfisher’s European retail business, has not declined any further.This suggests the self-help measures instigated by CEO Veronique Laury-Deroubaix—a key manager in the region before stepping up to the top job in December—are gaining traction.

France DIY sales firmer, UK’s softer

France total sales were up, with Brico Depot leading in the quarter by a respectable 1.6% like-for-like sales rise (at stores open over a year) whilst the rate at Castorama was the same as in the prior quarter at -0.6%.

The UK picture was less rounded. Gross margins probably touched a 1 percentage point advance during the quarter, judging by signs of good sales momentum, combined with what we know about wider buoyant UK retail trends in the period. Kingfisher booked an overall UK gross margin rise of 90 basis points.

B&Q UK & IRE slipped faster by 1.5% vs. 1.1% and the wholesale/retail hybrid Screwfix roared on with a 15.4% LFL.

I spy discounts

This suggests to me the presence of discounting in the consumer business and my next question on that would concern what KGF’s further promotion plans are, and perhaps in which business they’ll be deployed.

Nevertheless, there’s little doubt that Kingfisher is a perceptibly stronger beast than it was even at the end of last year, also partly helped by a promising ‘Other International’ sales rise of 7.5% and 3.8% on a like-for-like basis.

The group rise of 0.8% in first-quarter like-for-like sales, with retail profit in constant currencies up 1.4% at £150m are also an encouraging sign.

Of course, these are just first steps that need to be confirmed in the next few quarters, but for now, the stock price advance looks well deserved.

The uptrend that brought buyers in November a return of 34% also makes sense this morning, and a further 2 percentage points or even more look do-able today.

The stock should pause in the medium term though. A revisit to 376p could provide an opportunity to add.

Half-hourly intervals in the Kingfisher Daily Funded Trade also suggest that bullish bets will soon need to be taken be tidied up.

If the narrow floor between 377 and 379 gives way in combination with a short signal from the Slow Stochastic Oscillator (bottom sub-chart), the gap from Wednesday afternoon trading between ~373 and ~367 could prove hazardous.