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Kingfisher rating slashed as Merrills frets over French consumers

A deteriorating outlook for Kingfisher’s (LON:KGF) French businesses has prompted Bank of America Merril Lynch to slash its stance on the B&Q owner.

The US broker has set a new price target of 270 pence and now rates the shares as ‘underperform’ instead of a ‘buy’.

The broker is worried about the French consumer macro outlook and the implications of a sharp slowdown in the housing market on sales in France.

The UK and Poland will be not able to offset this weakness and because of this a potential return of cash to shareholders may now happen later than sooner and be smaller than expected, it believes.

Merrill has cut its FY13 and FY14 earnings forecasts by 2 per cent and 6 per cent respectively as last year France contributed about 50 per cent of group’s profits and about two-thirds of profit growth.

The slowdown in housing transactions and permits, compounded with a poor consumer macro outlook, means it will be increasingly difficult for France to avoid a like-for-like sales decline in FY13-FY14 and to increase the already high French Ebit margin.

In addition, the broker expects a continued sluggish UK housing market and soft Polish consumer environment.

Source : Philip Whiterow – Proactive Investors

28 August 2012
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