Kingfisher Placed on Negative Watch by J.P. Morgan on H1 Earnings Risk

J.P. Morgan has placed home improvement retailer Kingfisher (LON:KGF) on a Negative Catalyst Watch, signaling concerns that the company may miss consensus earnings expectations for its first half. The bank attributes the potential shortfall to weaker-than-expected trading in the UK, particularly at its B&Q banner, ahead of the results scheduled for September 22.

Analyst's View

The bank forecasts Kingfisher's first-half pretax profit will be £359 million, which is approximately 3% below the market consensus of £370 million. J.P. Morgan maintained its "underweight" rating and 290 pence price target on the stock.

The negative outlook is primarily driven by an anticipated slowdown in the UK. Analysts at the bank project that B&Q's second-quarter like-for-like sales will fall by 1%, a significant reversal from the consensus forecast for 1.3% growth.

According to the note, a recent UK heatwave was "at least slightly unhelpful" for outdoor and seasonal projects and may have caused some trade customers to postpone work. While sales of cooling products provided a partial offset, the bank expects Kingfisher's first-half UK retail profit to decline 6% year-over-year to £323 million, about 5% below consensus.

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Broader Headwinds and Outlook

Beyond the UK, J.P. Morgan expressed caution on Kingfisher's French operations, where it noted that consumer demand remains soft and opportunities for further cost savings appear limited. The bank's forecasts for France and Poland are otherwise broadly in line with consensus.

For the full year, J.P. Morgan's pretax profit forecast of £567 million sits at the bottom of Kingfisher's own guidance range of £565 million to £625 million and is roughly 2% below the market average.

Other factors contributing to the bank's decision include uncertainty in the UK housing market amid policy discussions around stamp duty, the lack of an announced successor for outgoing CEO Thierry Garnier, and the stock's recent price recovery, which could make it more vulnerable to negative news.