Clouds linger despite Kingfisher surge

A surge in summer spending is welcome at B&Q owner Kingfisher, but it's done little to change the bigger picture for Richard Hunter, head of markets at interactive investor.

As with the wider UK economy, Kingfisher had a much improved second quarter as the travails of the "Beast from the East" receded and were replaced by warmer weather.

To some extent, the script at Kingfisher tends to write itself. Screwfix remains its main engine of growth, B&Q lags slightly, whilst by geography Poland remains positive and France under some pressure.

The better news in this particular quarter is that B&Q's performance rebounded from a poor opening to the year, with sales which outpaced both the first quarter and the previous year as consumers returned to buy products in weather-related categories.

Elsewhere, work is ongoing towards improving gross margin whilst the transformation plan remains on track.

From an investment perspective, the adequate dividend yield of 3.8% is underpinned by a supportive share buyback programme.

Less positively, the performance in France is something of a concern, where weaker footfall combined with higher costs combined to deliver a negative performance.

This is quite apart from the uncertain UK economic outlook where wage growth continues to nudge above inflation, although not to the extent that the consumer has confidence to open the spending floodgates.

The share price performance has tended to focus on the negatives of late, as it has done today. A 20% drop over the last six months looks less painful over a longer period, but has still fallen 6% over the last year as compared to a hike of 1.5% for the wider FTSE 100.

Even so, bulls of the stock currently have the upper hand, where the market consensus of the shares as a buy remains intact on hopes for delivery of the transformation plan.