Kingfisher PLC (LON:KGF) is trading market share for margin, according to Deutsche Bank’s analysis of the DIY retailer’s third quarter update.
The German bank said the retailer’s sales were a touch below expectations, with a weak performance in France offsetting performances in Poland and the UK.
“We think the results in France reflect continued reduction in promotions, and as such better gross margins in H2 [second half] should compensate for the sales miss,” Deutsche said, as it left its full-year forecast unchanged.
In Deutsche’s view, expanding margins in a French market where sales volumes growth has been hard to come by is a sensible move. Meanwhile, in the UK and Poland, sales remain healthy, with UK sales driven by Screwfix, as the B&Q store reduction programme approaches its end.
“There are still no signs of a changed environment following the Brexit referendum, and the competitive landscape is more likely to be a driver in 2017 than macro or currency,” the bank said.
As might be appropriate when analysing a home improvements retailer, Deutsche Bank is sitting on the fence with its ‘hold’ rating, given the premium rating the stock enjoys over its peers.