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Kingfisher and Travis shares rise on Bunnings woes

Share price growth

Shares in B&Q owner Kingfisher rose today following Wesfarmers announcement that it intended to take a £454m write-down on its acquisition of Homebase and could even leave the UK and Irish markets, following a strategic review.

Read - Wesfarmers admit Homebase disaster and prepare way for UK & Irish exit

At one point Kingfisher shares lead the FTSE 100, trading up 2%, whilst shares in Wickes owner Travis Perkins increased 0.6%.

Wesfarmers wrote off the £454m related to Homebase on Monday, more than the £340m it originally paid for the DIY chain back in February 2016, blaming a number of “self induced” blunders in managing the firm. Wesfarmers was intending to replicate the success of its Bunnings hardware stores in Australia and New Zealand but admitted it had misjudged the market.

It could now close as many as 40 stores in Britain and the option of selling the business was under consideration, though not the preferred outcome.

Read - Wesfarmers could close up to 40 Homebase stores

Broker Jefferies said “Pulling the plug on B&Q’s largest competitor would have major benefits for Kingfisher. We believe that the chances of an exit are greater than 50 percent, if we consider the key factors behind this weakness.” It want on to say the benefits of an exit to Kingfisher were self-evident, given Wesfarmers UK sales of £1.23 billion pounds versus £3.5 billion pounds at B&Q. 

UBS said the re-positioning of Homebase had already benefited Wickes, particularly in the showroom category. "There may be further benefits as Homebase store closures result in share shift,” it said. “However, trading in DIY may have weakened towards the end of 2017".

Read what we think will happen to Bunnings in 2018 here.

Source: Insight DIY Team

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05 February 2018

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