Kingfisher shares, B&Q and falling timber 

Despite supply chain problems affecting lots of retailers, independent analyst Alistair Strang looks for bullish signals.

When we reviewed Kingfisher (LSE:KGF) a year ago, our criteria for a move to current levels proved quite concise. Absolutely everything should now point to continuing success for the owner of B&Q, just a few little flies splashing around in the ointment!

With pandemic restrictions easing, the stores appear to be fully open, a recent trip to buy some hardware even allowing a direct path to the checkout, rather than the ridiculous maze of arrows.

However, similar to supermarkets, there appeared to be rather a lot of duplicate items on shelves, giving a suspicion the store was perhaps suffering from the supply chain problems which are distressingly common. The timber yard, once the shock at ridiculous prices eased, also was sparsely stocked. Perhaps this was just common sense, someone in the buying department opting to reduce stock levels rather than face being stuck with products at impossible prices.

Worldwide, the price of timber is thankfully easing, perhaps due to the markets voting with their wallet. For instance, the Nasdaq Lumber commodity index is presently around $480. A couple of months ago, it was at $1,670. The return to $480 takes the market back to levels experienced since 2016, aside from the impossible spike seen in the first half of this year.

Additionally, the supply chain problem continues and doubtless is making life interesting for B&Q. Whether it’s garden equipment, household goods, or whatever, the company imports quite a few lines from Europe. Anecdotally, European haulers prefer to avoid the UK. And UK lorry drivers are demanding sensible pay if they return to their jobs. Between the pandemic hangover and the ongoing Brexit hangover, it’s apparently not fun being a UK retailer.

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Near term, weakness on Kingfisher below 348p looks capable of provoking reversals to an initial 332p. If broken, our longer term secondary calculates at a less likely 289p. We’re not comfortable with the secondary calculation as it risks returning to the share price below Blue on the chart, an amazing trend line which dates back to 1999!

More likely, it feels like strength exceeding 379p shall propel the share toward 431p next. Some hesitation feels very possible around such a level, but closure above 431p should prove important for the longer term, suggesting a future trip toward 532p.

Source: Trends and Targets. Past performance is not a guide to future performance.