Many FTSE 100 stocks have fallen in recent months. Some look like bargains to pick up now with a view to them rebounding later if a market recovery were to occur.
One stock I’m not planning on adding to my holdings any time soon is Kingfisher (LSE: KGF). Here’s why.
Home improvement retailer
Kingfisher is one of the biggest home improvement retailers around, with approximately 2,000 stores across 10 countries and an 82,000-strong workforce. Some of its best known brands include B&Q, Screwfix, and TradePoint to mention a few.
Kingfisher shares are currently trading for 201p. Over a 12-month period, they’re only down 2% from 206p at this time last year. However, since macroeconomic issues began hindering markets, the shares have fallen 30% from 286p in February to current levels. They’re down even further since the height of the pandemic when the business enjoyed a great spell.
Economic uncertainty, profit warnings, and gloomy outlook
During the pandemic, many of us found ourselves locked down and at home looking for things to do. Kingfisher stores were deemed essential and therefore remained open. I personally remember attempting a few DIY projects and frequenting B&Q for decorating supplies. Kingfisher enjoyed a great time during this period.
Fast forward to 2023 and soaring inflation, rising interest rates, and geopolitical tensions have wreaked havoc for many FTSE 100 stocks, Kingfisher included. Some of the by-products of these issues include a cost-of-living crisis and fears of a housing crash to mention a couple. These factors have dampened the Kingfisher share price substantially. After all, people are concerned about food and energy costs, not decorating their homes.
With that in mind, Kingfisher’s performance has been materially impacted. The business recently announced that it was downgrading profit forecasts by 7%, compared to original estimates.
The ongoing fight against inflation and other issues that have reared their heads don’t seem to be coming to an end anytime soon. This uncertainty is a major red flag for me when considering Kingfisher shares.
On the other side of the coin, an argument could be made that Kingfisher shares are a contrarian buy now for greener pastures later down the line.
For example, Kingfisher has an excellent profile and presence. This could help boost its performance and shares when the economic outlook brightens up. Furthermore, there is a passive income opportunity at present with a dividend yield of 6% on offer. Personally, I’m not convinced it is sustainable at such levels. Plus, the yield will have risen as the shares have fallen off recently.
Finally, Kingfisher shares look cheap right now on a price-to-earnings ratio of just 11. This is lower than the FTSE 100 average of 14.
Better FTSE 100 stocks out there
I’m not adding Kingfisher shares to my holdings any time soon. Too much economic uncertainty is the main reason. Plus, revising profit targets is rarely a good sign, in my opinion.
I believe there are better FTSE 100 stocks that would boost my holdings right now. These stocks have better fundamentals, a sustainable passive income opportunity, and defensive traits. I’ll be taking a closer look at these other stocks instead.
