Another strong performance expected Kingfisher was fortunate to be able to trade through lockdown and benefit from the switch in consumer spending towards Home categories during lockdown, which has continued through the summer. We forecast 1H21E IFRS 16 PBT of £375m (+11% yoy) versus company-compiled consensus of £361m. Sales for almost the whole period have been reported with Q2 sales seeing an impressive return to growth in all markets from June. While it is early days in implementing the ‘Power by Kingfisher’ strategy, we are looking for an update on the cost efficiency initiatives and optimisation of its OEM sourcing programme, as well as progress on price repositioning and making its various formats more distinctive. We expect strong trading and its inventory reduction programme to have helped its net cash position. Risks to FY21 forecasts on the upside Focus will be on any comments on current trading. France is likely to have a good August, which is an important trading period, if the recently reprinted August Banque de France data is anything to go by. It suggests continued strong demand in France with DIY sales up 13%, though this is a slowdown on July’s 19% and June’s 30% growth. In the UK, August’s BRC data suggested that when the weather turned more autumnal, demand fell off in DIY. Given that our FY21E PBT forecast of £558m is based on flat H2 total sales in its 3 major markets (UK, France and Poland) and we are 5% below consensus of £585m, there may well be some upward pressure on FY21 consensus, if August was that strong in France. This is probably already reflected in the current share price, in our view. Challenging times ahead. Reiterate Sell. The unknown is the sustainability of demand for the rest of the year as the macro environment starts to deteriorate. We suspect demand will have been pulled forward from next year and believe consumer spending is likely to be impacted by rising unemployment which, together with a switch-back in spending to more leisure pursuits, may hit discretionary retail spending in 2021. Consequently, we believe Kingfisher could struggle to match FY21’s strong performance. Valuation (CY21 PE 16.2x) is too demanding for a business for which we struggle to see where sustainable long-term growth will come from given the structural pressures in its markets from the shift online, the rise of the discounters and the ‘do it for me’ trend.