Slightly Increasing Kingfisher’s FVE After Better-Than-Expected Q2; Shares Remain Fairly Valued

Kingfisher has attempted multiple strategies to optimize its product offering and leverage its leading position in the French and British home improvement market with little success. Fiscal 2020-21 marked the first year since fiscal 2017 that Kingfisher reported an increase in like-for-like sales. While the pandemic has provided unexpected tailwinds for Kingfisher, such as increases in do-it-yourself activity and online penetration rates, operating margins remain below international peers. We believe 2020 helped pull forward future demand, which we expect to normalize in future, with Kingfisher's return on invested capital continuing to struggle to meet its cost of capital.