Kingfisher Share Price Forecast as a Dangerous Pattern Forms

Summary:
• Kingfisher share price has been under intense pressure in the past few weeks as the company faces numerous challenges.

Kingfisher share price has been under intense pressure in the past few weeks as the company faces numerous challenges. The stock rose to 255p on Tuesday, which was about 32% below the highest level this year and 36% lower than the 2021 high.

Kingfisher earnings disappoint

Kingfisher is one of the biggest retailers in the UK. The company focuses on home improvement products, making it similar to Home Depot and Lowe’s. It has over 1,500 stores and 80,000 employees in key markets like the US and UK. It also has operations in six more countries internationally. Some of its top brands are B&Q, ScrewFix, Castorama, and Brico Depot among others.

Kingfisher’s business is facing numerous challenges. For one, demand for its products has declined sharply in the past few months. Demand for these products surged to a record high during the Covid pandemic as people spent more time at home. 

According to the company, total sales dropped from £7.1 billion in the first half of 2021 to £6.8 billion in the same period this year. Its gross profit dropped by 7.4% to £2.4 billion while its post-tax profit slipped to over £373 million.. It maintained its dividend at 3.80p.

Kingfisher is also facing a margin challenge as inflation surges and the British pound crashes. Higher inflation has led to weak demand for its products. At the same time, the weak sterling has made it significantly expensive for the firm to import goods. Its retail profit margin dropped from 10.8% to 8.2%.

Kingfisher share price forecast

The daily chart shows that the KFG share price has been in a strong bearish trend in the past few days. It has formed a descending channel pattern that is shown in black. The stock has also moved to the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved slightly above the neutral level of 50.

Therefore, there is a likelihood that the Kingfisher share price will have a bearish breakout as sellers target the lower side of the channel at 230p. A move above the resistance level at 262p will invalidate the bearish view.