Kingfisher Earnings: Operating Profits Withstand a Decline in Sales; Guidance Upgraded

Shares in no-moat Kingfisher are trading 7% higher intraday, following better-than-expected first-half earnings and an upgrade in its profit-before-tax and free cash flow guidance. Management has done a commendable job of keeping costs in check despite a 2% decline in first-half organic sales, including a 0.6% positive impact from more trading days. Sales of big-ticket items and seasonal products, collectively accounting for 36% of group sales, fell 7% and 3%, respectively. Following a lot of pessimism that was baked into the share price at the start of the year, we now believe the stock is reasonably valued to our GBX 290 fair value estimate, which we maintain.