May 31, 2012 / 9:05 AM / 7 years ago

STOCKS NEWS EUROPE-Bounce back hopes boost Kingfisher post Q1

Shares in Kingfisher rise 2.4 percent, second-top gainers on a rallying FTSE 100, with investors backing the company to bounce back despite the gloomy economic environment, as Europe’s biggest home improvements retailer posts a steep fall in first-quarter profits.

Against tough comparatives, the firm, which runs the market-leading B&Q chain in Britain as well as Castorama and Brico Depot in France and elsewhere, saw its retail profit fall 8.6 percent to 160 million pounds ($248.5 million) in the three months to April 30, at the bottom end of analyst forecasts.

Seymour Pierce says in a note it has confidence in the management despite uncertainty over the outlook in Kingfisher’s two core markets, question marks over its Chinese operation and the lacklustre objective of improving operating profitability by only 300 million pounds over the next five years.

“Earnings will also benefit from significant growth in direct sourcing over the next three years ... and the development of common ranges to all stores and the further expansion of own label,” the broker says, adding the stock is fairly rated at 11.2 times 2013 earnings estimates.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, says: “The company’s track record of delivering superior returns in tougher times should see it through as the year progresses.”

That view is reflected in the performance of Kingfisher’s shares, which are up 10.2 percent over the last 12 months and among the top 20 performers on London’s blue chip index in the period, comparing with a 5 percent drop on the FTSE 100.

To see a statement, please click

Reuters messaging rm://david.brett.thomsonreuters.com@reuters.net

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