One suspects Barclays Capital has just employed a new team covering retail stocks with initiations of coverage across the board.
The most eye-catching was the ‘underweight’ call on B&Q owner Kingfisher PLC (LON:KGF), which it reckons is worth 300p a share. The stock is currently changing hands for 325p.
At issue is Kingfisher’s turnaround plan, which Barclays described as sensible, but points out could disrupt operations in the short term and “negatively impact financials”.
“Additionally, the company is facing difficult macro and market share losses in France that we believe are unlikely to be resolved quickly,” the banks said.
It was more positive on Dunelm Group PLC (LON:DNLM) and JD Sports Fashion PLC (LON:JD.) - it rates both ‘overweight’. The current share price “offers a favourable entry point” for would be buyers of stock in the former, while it describes the latter as “going from strength to strength”.
Discount retailer B&M European Value Retail SA (LON:BME) is initiated at ‘equal weight’, while Barclays begins coverage of Dixons Carphone PLC (LON:DC.) with an ‘overweight’ call.
“It has done well integrating the online and offline parts of its business and it trades close to its historical one-year forward price-to-earnings lows of around nine-times, which we do not believe is justified,” Barclays said.
“Additionally, we believe that the company should increase its dividend payout policy as a result of its strong free cash flow generation.”
Next 'underweight' too ...
Finally, the Barclays team isn’t a fan of Next Plc, which also rates ‘underweight’.
It essentially says the High Street giant is stuck between a rock and a hard place, or more precisely a difficult macro-economic backdrop and a shift to online fast fashion a la Boohoo and ASOS.
“Investment in a better online presence in the upcoming fiscal year is unlikely to improve results in the near term while deteriorating consumer confidence and spending are likely to pressure earnings,” Barclays said.
“Longer-term, the company could face risks from increased competition and an older customer base. With a maturing customer base the company faces the risk of becoming less relevant in fashion.”