Kingfisher B and M and Next Tipped to Capitalise on Housing Market Conditions

RBC Capital Markets has identified Kingfisher PLC, B&M European Value Retail SA and Next PLC as its preferred UK retail holdings amid expectations that the housing market will maintain stability rather than experience significant growth. The broker’s analysis suggests that subdued housing activity and fragile consumer confidence will continue to exert pressure on home-related expenditure, though several mitigating factors could provide support.

Stable interest rates, real wage growth and company-specific operational improvements are expected to partially offset the challenging macroeconomic environment. RBC anticipates that the geographic divide between northern and southern England will persist, with house prices remaining more robust across northern England, Scotland, Wales and Northern Ireland, whilst London and the South East continue to face headwinds.

The broker highlighted that Kingfisher, B&M and Dunelm Group PLC hold relatively limited exposure to London, positioning them to benefit from this regional divergence. Home-related products represent nearly all of Dunelm’s sales, just over half of Kingfisher’s revenue and approximately a quarter of B&M’s turnover.

RBC also identified potential for an “improve not move” trend, whereby elevated transaction costs encourage homeowners to invest in renovating their current properties rather than relocating. Kingfisher appears well positioned to capitalise on this dynamic through expanding its trade sales via the TradePoint loyalty scheme and developing B&Q’s online marketplace. Approximately half of the marketplace’s customers represent new entrants to DIY.com, with 15% subsequently purchasing B&Q own-brand products.

For B&M, the broker suggested that enhanced performance could be achieved by refocusing on retail fundamentals, including store execution and value proposition. Next’s prospects demonstrate less dependence on the UK housing market, with international sales approaching 25% of group revenue. The US market presents substantial growth opportunities from a relatively low starting point.

RBC Capital Markets has maintained ‘outperform’ ratings on all three retailers. Current valuations show Kingfisher trading at 11 times forecast 2027 earnings, B&M at 10 times and Next at 17 times.