Kingfisher: Lowers Guidance Once Again Amid Weak Sales

No-moat Kingfisher reported a 4% decline in organic sales during the third quarter, notably lower than company-compiled consensus of negative 2%. Its French businesses were the main cause for the weak performance, seeing the top line fall 9%, partly explained by an unfavorable product mix, which was not geared for the unusually warmer weather during the quarter. Full-year profit-before-tax guidance was lowered to GBP 560 million from GBP 590 million, having been downgraded from GBP 630 million during the previous quarter. Its second profit warning in as many quarters highlights the weak macroeconomic environment in Europe and that demand continues to normalize, having benefited significantly during the coronavirus pandemic and thus we don't anticipate a meaningful recovery in the short term. Investor confidence in the business has declined with shares trading 6% lower. We maintain our GBP 2.90 fair value estimate and view shares as undervalued at current levels.