Kingfisher PLC (LON:KGF) took a tumble on Monday as RBC Capital downgraded its rating for the home improvement retailer to ‘underperform’ from ‘sector perform’, saying it expects the earnings downgrade cycle to continue
The rating downgrade came as the Canadian bank’s analysts reduced their pre-tax profit and earnings per share forecasts for the owner of B&Q and Screwfix stores by around 4%-6% for full-year 2019/20 due to lower like-for-like sales assumptions.
READ: B&Q owner Kingfisher to exit Russia, Spain and Portugal as third-quarter sales fall
In a note the clients, the analysts pointed out that the FTSE 100-listed firm’s major brand Castorama is underperforming the French DIY sector as it has a weak digital offering, and its new unified offering has not resonated with customers. They noted that Castorama's like-for-like sales growth in Poland has recently faded as well.
The analysts also highlighted the impact of a challenging outlook for French and UK housing markets, saying that, as a result, it will take time for customers to respond to Kingfisher's marketing initiatives.
In early morning trading, Kingfisher shares were 4.5% lower at 216.60p, with RBC also cutting its target price for the stock to 200p from 240p..