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JP Morgan Cazenove eyes positive outlook for Kingfisher

Last month Kingfisher, which owns the B&Q and screwfix brands as well as other European home improvement retailers, told investors that it has made a strong start to the financial year UK retail group Kingfisher (LON:KGF) is entering a key phase of its development now that it has put in place the foundations for growth, according to JP Morgan Cazenove analyst Gillian Hilditch.

Importantly the analyst points out that the group’s earnings growth will come from improved margins, not turnover, therefore the outlook is positive with or without an improvement in the retail sector.

“This means that irrespective of one’s view on the outlook for the consumer next year, earnings progression appears underpinned” the analyst said. According to Hilditch the group will re-invest its gains, to drive market share growth.

Hildictch rates Kingfisher as a ‘buy’ with a 329p target, the analyst also added the stock to JP Morgan’s ‘European Analyst Focus List’.

Last month Kingfisher, which owns the B&Q and screwfix brands as well as other European home improvement retailers, told investors that it has made a strong start to the financial year as warm weather boosted sales.

Total group sales in the 13 weeks to 30 April climbed 3.3 percent to £2.73 billion and retail profits climbed 19.1 percent to £174 million. In constant currencies, sales and profits were up 4.7 percent and 20.9 percent. Kingfisher noted that performance in France was particularly strong with sales growing ahead of the market.

Net cash rose from £86 million in May 2010 to £283 million.

“I am pleased that we have made a strong start to the year, capitalising on more favourable weather conditions right across Europe and extended public holidays in the UK,” said chief executive Ian Cheshire.

“Whilst we have got off to a good start, it remains our view that this year is likely to be a tough one for all retailers, especially in the UK. It is also likely that the early spring weather will have brought forward some of our outdoor seasonal sales.”
“So we remain very focused on our well established programme of self-help to deliver a solid full year result, especially with the key summer trading period in France still ahead of us.”

Source : Jamie Ashcroft - Proactive Investors United Kingdom
http://www.proactiveinvestors.co.uk/companies/news/30647/jp-morgan-cazenove-eyes-positive-outlook-for-kingfisher--30647.html

14 July 2011
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