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Many FTSE 100 Shares have fallen in recent months. Some look like bargains that can be taken now with a view to recovering later should a market recovery occur.
One stock I don’t plan to add to my holdings anytime soon is Kingfisher (LSE: KGF). This is why.
Home improvement retailer
Kingfisher is one of the world’s largest home improvement retailers, with approximately 2,000 stores in 10 countries and a workforce of 82,000. Some of their best-known brands include B&Q, Screwfix and TradePoint, to name a few.
Kingfisher shares are currently trading at 201p. Over a 12 month period they are only down 2% from 206p this time last year. However, since macroeconomic issues began to hamper markets, the shares have fallen 30% from 286p in February to current levels. They have fallen even further since the height of the pandemic, when the business enjoyed a great run.
Economic uncertainty, profit warnings and bleak outlook
During the pandemic, many of us find ourselves cooped up and at home looking for things to do. Kingfisher stores were deemed essential and therefore remained open. Personally, I remember trying a few DIY projects and frequenting B&Q for decorating supplies. Kingfisher enjoyed a great time during this period.
Fast forward to 2023, soaring inflation, rising interest rates and geopolitical tensions have wreaked havoc on many FTSE 100 stocks, including Kingfisher. Some of the consequences of these problems include a cost of living crisis and fears of a housing crisis, to name a few. These factors have substantially reduced Kingfisher’s share price. After all, people care about food and energy costs, not the decoration of their homes.
With this in mind, Kingfisher’s performance has been materially affected. The company recently announced that it would lower its earnings forecast by 7% from original estimates.
The ongoing fight against inflation and other problems that have arisen does not appear to be coming to an end any time soon. This uncertainty is a major red flag for me when considering Kingfisher stock.
On the other side of the coin, you could argue that Kingfisher stock is a contrarian buy now for greener pastures in the future.
For example, Kingfisher has an excellent profile and presence. This could help boost its performance and shares when the economic outlook improves. Additionally, there is currently a passive income opportunity with a 6% dividend yield on offer. Personally, I’m not convinced it’s sustainable at those levels. Additionally, the yield will have increased as the stock has fallen recently.
Finally, Kingfisher shares look cheap at the moment with a price-to-earnings ratio of just 11. This is below the FTSE 100 average of 14.
<h2 class="wp-block-heading" id="h-better-ftse-100-stocks-out-there”>Best FTSE 100 shares out there
I won’t be adding Kingfisher shares to my holdings anytime soon. The main reason is too much economic uncertainty. Also, in my opinion, revising earnings targets is rarely a good sign.
I think there are better FTSE 100 stocks that would boost my holdings at the moment. These stocks have better fundamentals, a sustainable passive income opportunity, and defensive traits. Instead, I’ll take a closer look at these other stocks.
