LONDON (ShareCast) - (Sharecast News) - Kingfisher lost out on sales due to the Beast from the East snow and is not likely to recover all of this seasonal weakness later in the year, RBC Capital Markets said.
RBC said the first-quarter update was softer than expected, with like-for-like sales down 4%, below consensus expectations, with snow disruption in major markets estimated to accounted for three percentage points of the decline.

Analysts, who think the UK home improvement market has become more challenging in recent months, expect the Q1 disappointment to lead to consensus PBT downgrades in the order of 2-3%. "Major competitors Wickes and Bunnings have their own company-specific challenges but even so as market leader we don't think Kingfisher will be immune from this trend."

There were brighter notes, RBC, which has a 'sector perform' rating on the shares with a 315p price target, noted that business disruption appeared broadly in line with CEO Veronique Laury's turnaround plan and new ranges are "clearly having a positive impact" on the performance of Brico Depot in France.

Furthermore, the UK market weakness is partly offset by Kingfisher's international exposure. "We are concerned about ongoing disruption and execution risk with the transformation plan, and market expectations medium term, but we think the story could improve again as France online improvement comes through in the summer and as we should see some capacity withdrawal in the UK."

With the shares trading at just over 13 times full-year earnings, broadly in line with the UK general retail sector average, but with higher-than-average EPS risk, in RBC's view.

In the sector, analysts' top larger-cap pick is Next, favoured as "an anti-consensus online and cash-returns story".

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