Market Report: Kingfisher falls back as B&Q worries build up

Kingfisher closed at its lowest price since December last night thanks to fears over the challenges facing its flagship B&Q chain.

The home improvement group slid back over 4 per cent as Société Générale downgraded its rating to "sell", with the broker saying that "more severe consumer headwinds" means it is "time to worry about B&Q in the UK".

Pointing out that "total sales, and more importantly, sales density, have been in decline since 2005", SocGen's analyst John Baillie predicted that the DIY chain's retail profits will fall nearly 15 per cent over the next two years.

Giving one of the reasons for his pessimism as the link between B&Q and the property market, he added that the "current trends and outlook for the housing market in 2011 and 2012 are not good; falling activity and falling prices make an unpleasant cocktail for the home improvement sector and for the UK market leader, B&Q, inparticular".

On the group generally, he said, "more challenging times lie ahead in terms of delivering growth post the recovery phase, as this will be based on international expansion". He added that many countries "are not ready for the group's retail home improvement model".

As a result Kingfisher slipped back 11.4p to 243p, but it was by no means the only retailer struggling. Marks & Spencer and Next dropped 6.6p to 339.8p and 36p to 1,940p respectively, although Associated British Foods rallied 26.5p to 993p following its fall on Monday. Meanwhile HMV reached a new all-time low of 16.25p after shedding 4.5p as it announced not only its second profit warning of 2011 but also the departure of its chairman Robert Swannell. Despite a positive start to the day, the FTSE 100 finished 58.25 points behind at 5,935.76 following comments from the US Federal Reserve chairman Ben Bernanke on the effect of high oil prices on the country's economy and continuing fears over unrest in the Middle East and North Africa.The miners also failed to hang on to early gains, with Fresnillo – up 2p to 1,596p – managing just a tiny rise despite the Mexican silver miner's full-year pretax profit more than doubling to £1bn.

Capita was the top tier index's biggest gainer as it moved up 37.5p to 763p. The group revealed it was discussing a potential contract extension with Zurich Financial Services, which market voices said raised hopes of the private sector starting to return to outsourcing.

After a big hit earlier in the week following its results, HSBC was not looking any better yesterday. Retreating 20p to 658p, Deutsche Bank and UBS removed their "buy" ratings, with the latter saying its "rampant cost growth and a resolute unwillingness to discuss revenue prospects leave us without confidence in the 2011 outlook". Barclays was also down – driven back 6.6p to 313.25p – as it announced it had agreed to buy Egg's British credit card assets. The only detail it revealed on the price was that it was "a significant discount to gross receivables", which the bank said was around £2.3bn.

The online grocer Ocado was given a major boost by Goldman Sachs upgrading its advice to "buy" from "neutral". The broker – which last month handled the sale of John Lewis's pension fund's stake in the online grocer, after which the group fell over 10 per cent – said it was now at "an attractive entry point" and "well placed to deliver strong growth", as it gained 12.3p to 213.3p.

The second line's biggest riser was Centamin Egypt, advancing 9.7p to 128.2p after a severe drop on Monday thanks to fears that it could be banned from exporting gold. As well as arebound from that fall – plus an increase in the yellow metal's price – traders also noted the Canadian company Nuinsco had said it had seen positive results from samples taken from areas in Egypt near Centamin's Sukari mine.

Back on the top-tier index, Tesco was down 3.65p to 400.55p on Sir Terry Leahy's final formal day as CEO of the supermarket giant; Shore Capital described the appointment of Philip Clarke as his replacement as "timely" and said it "bodes well for investors in the retailer".

GKN declined 8.4p to 201.5p following its final results, despite revealing pretax profits of £363m – over four times 2009's total. However, its fellow plane parts manufacturer Meggitt jumped up 13.5p to 351.7p as it made bullish comments over its outlook.

The small-cap outsourcer Xchanging was left 0.5p weaker at 55.5p after its executive chairman, Nigel Rich, prepared shareholders for "a year of transition as we address and resolve clearly defined problems." The group, whose chief executive and founder DavidAndrews left last month, made a statutory loss in 2010 of over £55m.

Meanwhile, on the fledgling index Superglass Holdings was knocked back 6.5p to 27p – a fall of nearly 20 per cent – after issuing a profit warning. The company, which makes insulation products, said it had not got as many sales as it had hoped from the Government's Carbon Emission Reduction Target (CERT) scheme.

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