J.P. Morgan has put Kingfisher on a Negative Catalyst Watch as the home improvement retailer prepares to report first-half results, signalling the broker expects the outcome may disappoint market expectations. The bank forecast first-half pretax profit of 359 million, about 3% below an average consensus near round 370 million, indicating a potential miss.
The brokerage maintained its "underweight" recommendation and a 290 pence price target on the stock. J.P. Morgan expects B&Q like-for-like sales in the second quarter to fall 1%, missing the company's consensus projection for 1.3% growth. The broker attributed the downgrade in part to a UK heatwave it said was "at least slightly unhelpful" for outdoor projects and led some trade customers to delay work, although it noted that sales of cooling products provided a partial offset.
On the UK retail line, J.P. Morgan projects first-half retail profit in the UK will decline 6% year on year to 323 million, which sits roughly 5% below the consensus average of 340 million.
J.P. Morgan attributed the UK retail profit downgrade to a combination of a strong seasonal comparative in the prior-year first half and expectations of only limited gross margin expansion. In its view, seasonal normalisation and a trade sales mix will partly offset initiatives intended to support margins.
For the group as a whole, the broker's forecast points to a first-half pretax profit decline of 2% year on year to 359 million, about 3% below the consensus average.
The broker said its estimates for France and Poland are generally aligned with consensus, but it remains cautious on France due to continued soft consumer demand and a reduced scope for additional cost savings after earlier rounds of efficiency measures.
J.P. Morgan left its full-year pretax profit projection largely unchanged at 567 million, representing a 1% increase year on year. That full-year number sits at the bottom of the group's guidance range of 565 million to 625 million but is roughly 2% below consensus.
Beyond trading and margin dynamics, J.P. Morgan also pointed to broader market and corporate governance considerations as reasons for placing the stock on Negative Catalyst Watch. The broker highlighted uncertainty in the UK housing market, noting that public discussion about stamp duty policy could prompt short-term caution among prospective homebuyers even though Prime Minister Andy Burnham reportedly said the government would not remove or change stamp duty in the next budget. J.P. Morgan further cited the lack of an update on a successor to outgoing Chief Executive Thierry Garnier, and observed that the stock's recent recovery amplified the case for caution ahead of the company's Sept. 22 results.
Contextual note: The broker's actions reflect expectations for a slightly weaker-than-anticipated first-half performance driven by weather-related trading patterns in the UK, mixed margin dynamics and continued caution around consumer demand in France, combined with governance and housing market uncertainty in the UK.