Kingfisher offers home improvement products and services in the UK and globally. Here in the UK, some of its best known retail banners include B&Q, Screwfix, and Tradepoint. It boasts over 1,300 store locations across Europe and is supported by over 75,000 employees.
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As I write, Kingfisher shares are trading for 326p. At this time last year, the shares were trading for 277p, which is a 17% return over a 12-month period.
The home improvement sector, as well as the property market, which are linked, benefitted from the pandemic. The UK government introduced a stamp duty holiday for a period of time to encourage home purchases. In addition to this, many consumers had a bit more cash in their pockets due to a lack of social events caused by the lockdown. This led to many people spending money on home improvements.
UK shares have risks
Despite my bullish stance, I must note risks associated with Kingfisher shares. Two primary risks standout to me. These are both macroeconomic factors that Kingfisher has no control over.
Firstly, rising interest rates have pushed up the price of many raw materials and other product-related costs. Sometimes, these costs cannot be passed onto customers who may turn to competitors for cheaper alternatives. Due to this, profit margins, performance, and returns could be affected.
Second, the supply chain issues facing many firms could hinder Kingfishers performance and returns too. Most of its products are manufactured overseas. Once complete, they are then moved around by shipping containers and HGVs.
Why I like Kingfisher shares
I believe the current tailwinds the property and home improvement sector have experienced recently are set to continue. Kingfisher is in an excellent position to benefit from this. It has an excellent presence and profile and some of its retail banners are staple names, especially here in the UK. I frequent B&Q and Screwfix often when attempting home improvements personally.
At current levels, Kingfisher shares look cheap with a price-to-earnings ratio of just eight. It also pays a dividend which could make me a passive income. Kingfisher’s dividend yield stands at over 3.5%. Some of my best UK shares are those that pay a good dividend. It is worth noting that dividends can be cancelled, however.
Finally, Kingfisher’s recent and historic performance has been good, although I understand that any past performance is not a guarantee of the future. Looking back, revenue increased from 2020 into 2021, as did gross profit. Before that, performance was very consistent, with revenues of over £11.5bn in 2018 and 2019. Coming up to date, a Q3 update released in November was also positive. All its retail banners reported positive performance and perhaps most tellingly, it continued to win market share from competitors.
Overall Kingfisher is one of the best UK shares right now, in my opinion. I would add the shares to my holdings at current levels. The shares are cheap; I can make a passive income from dividend payments and the market as a whole is growing right now.