Darty drags Kingfisher down: The Investment Column

Yesterday's 15.5p fall in Kingfisher's share price looks slightly harsh on the retailer, which turned in one of the season's better Christmas trading updates.

Stripping out new store openings, like-for-like sales rose by 7.8 per cent, which was better than Boots and only marginally behind Dixons.

The group figure included double- digit gains from both Woolworths and Comet. This was impressive as both were up against strong comparisons the previous year. The performance from Woolworths was even better given that the toy market appears to have lost sales to rival products such as sports clothing this year.

And if the recent figures from Adams were anything to go by, then the childrenswear market has not been easy either.

B&Q did well, buoyed by the gradual recovery in the housing market. And Superdrug delivered a 5 per cent increase in like-for-like sales.

Ironically it is now Darty, the French electrical chain, which is dragging the group performance back. Its like-for-like sales rose by just 2.4 per cent.

Only a couple of years ago it was Darty which was Kingfisher's saviour when internal problems damaged the performance of Comet and Woolworths, resulting in the group's calamitous 1994 profits warning.

Though Kingfisher's shares have risen by more than 60 per cent since then, yesterday's bout of profit taking makes the shares look attractive once more at 654.5p.

On upgraded analyst profit forecasts of pounds 380m this year and pounds 445m next time, they trade on a forward rating of 16 falling to 14. This is a discount to the sector that is due more to the disappointments of 1994 than fundamentals. It is worth pointing out that just a year ago analysts were forecasting Kingfisher 1996/97 profits of just pounds 310m.

Woolworths' problems back then were due to errors that have been sorted out rather than any underlying difficulty.

Comet should benefit from the PC boom and B&Q should be selling paint and pliers like no tomorrow if the housing market forecasts prove true.

If Darty returns to form as well, then Sir Geoff Mulcahy will have pulled off a remarkable recovery. The company has disappointed before, but the shares look good value.