The Investment column: Kingfisher

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The Independent Online
GOOD NEWS has been thin on the ground on the high street recently but Kingfisher, the Woolworths-to-B&Q retailer, provided a rare shaft of light in the gloom yesterday.

Like-for-like sales in the 13 weeks to October were up by 5.2 per cent, a figure many retailers would kill for nowadays. The figure rises to 6.4 per cent on inclusion of new businesses such as Castorama, the French DIY operation merged with B&Q, and Screwfix, the DIY distribution business.

The City has been bearish on UK retailers but may have forgotten Kingfisher's major exposure to continental Europe where the consumer outlook is improving. So while B&Q's underling sales rise of 8 per cent could have been factored in, a similar rise by Castorama was a pleasant surprise.

The electrical chains are also performing well. Comet saw like-for-like sales rise by more than 9 per cent, to be boosted by eight new stores next year. Darty looks solid in France and Kingfisher's chains in Germany, Belgium and Holland place it ahead of rival Dixons, which has only just made a Scandinavian acquisition.

Kingfisher also enjoys a stake in Libertysurf, the French Internet service provider. Deutsche Bank estimates that could be worth pounds 1bn.

On the home front, Woolworths' sales were held back due to the lack of a blockbuster video release to match last year's Titanic. But the first two Big W hypermarkets are fulfilling expectations and the fledgling chain will expand to eight next year. It all adds up to a strong story which is yet to be fully reflected in the share price, up 46p at 608.5p yesterday, a long way off its 930p peak in the spring. On SG Securities' full-year profit forecast of pounds 780m, the shares trade on a forward multiple of 19. Wal-Mart's takeover of Asda remains a threat, but the shares are still good value.