Kingfisher slips on Nomura downgrade

B&Q owner Kingfisher was under pressure after Nomura downgraded the stock ‘reduce’ from ‘neutral’ and trimmed the price target to 335p from 340p as it took a look at the general retail sector.

The bank said it has no issues with Kingfisher’s proposed unifying strategy as a means of offering differentiated home improvement products at low prices to customers. Nomura thinks it will drive long-term market share.

However, it said it was unclear at this juncture as to the programme's capital and revenue costs.

“It seems likely that the requirements of a major supply chain change, refitted store estate over time and employee costs of implementing the programme will put pressure on shareholder returns (and the buy-back in FY16),” said the bank.

As such, it has cut its estimates for some added costs and capex and no buy-back.

“Our view may prove short-lived, but we think the risks warrant trimming positions.”

Nomura cut Next to ‘neutral’ from ‘buy’, saying that given the strong performance of the shares since late September, there is little remaining upside to its unchanged price target of 8,000p.

“We do not expect to raise our EPS estimates for current trading or management’s initial guidance for FY17 when the company reports on 5 January.”

At 0920 GMT, Kingfisher shares were down 1.3% to 348.70p while Next was 0.2% lower at 7,925p.