Should I Buy Kingfisher?

LONDON -- I'm shopping for shares right now. Should I pop Kingfisher  (LSE: KGF  ) into my basket?

Storm warning
Last time I looked at Kingfisher, it had gone into a dive. Europe's largest home-improvement retailer had suffered a summer washout, losing an estimated 30 million pounds of profits in the U.K. and northern Europe as rain-soaked customers abandoned their gardens to the elements. Pre-tax profits had dropped 17% in what chief executive Ian Cheshire called his "toughest half" since taking charge in 2008. Tax hikes in France didn't help.

The weather forecast is pretty dismal as I write this, but the sun has been shining on Kingfisher's share price. It is up 25% over the past six months, against 7.6% for the FTSE 100, capping a strong five-year return of more than 200%. Yet its first-quarter trading results were wet and windy, with like-for-like sales down 4.2%, and a near 30% drop in profits to 114 million pounds. The culprit was the same: bad weather in Europe. You weren't the only one shivering indoors during this year's icy March and April. Kingfisher's customers were also sitting tight, having decided they could DIY another day. Sales of outdoor products fell 10%. Sales and profits were down 4.7% in the U.K. and Ireland and 5.6% in France. Economic storms didn't help, either.

Russian front
Like so many FTSE 100 favorites, Kingfisher has set its eyes on distant climes. Sales in Russia grew 17.4% to 91 million pounds, while B&Q China, which has 39 stores, saw sales rise 9.1% to 77 million pounds. Kingfisher also enjoyed a decent showing in Spain, thanks to new stores, but sales in Poland froze in the cold. I am increasingly impressed by the company's global reach. DIY has conquered the West. I don't see why the East won't fall as well. But there could also be headwinds, especially if the Chinese property market is as precarious as people say.

Latest figures suggest the U.K. housing market is picking up, but with inflation outpacing wages, the British consumer is still likely to struggle, while there are few signs of meaningful recovery in France. Then there's the weather. Whatever your views on climate change, the elements have been acting strangely lately, and Kingfisher's share price is very exposed.

Live and let DIY
After the recent share price run, it looks fully valued at 15.9 times earnings, against 12.7 for the FTSE 100. The yield of 2.7% also underperforms the index average of 3.63%. Forecast earnings-per-share growth of 6% to January 2014 and 11% to 2015 looks solid enough, and I would expect Kingfisher to perform strongly when the recovery finally beds in. Who doesn't want to do up their home once they've got a bit cash to spare? Some brokers are very keen. Most blame the weather for the company's recent difficulties. Jefferies has just upped its target price from 3.30 pounds to 4 pounds, and reiterated its buy call. I might buy Kingfisher, but only after it's been raining, and the share price is a bit soggier.

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