Seymour Pierce has retained its 'sell' recommendation for DIY retailer and B&Q owner Kingfisher following the new that the firm is putting its loss-making Irish business into administration.

It was reported on Friday morning that the company would likely close four of its nine stores and aim to reduce rents.

"This action highlights our concerns for the UK business," said Seymour analyst Freddie George.

"The company, we believe, has too much space for a multi-channel society while its stores are too large, difficult to shop and not aligned to the new trend for convenience. Gross margins have risen by over three percentage points points in both the UK and France over the last five years and, in our view, are likely to come under pressure as a number of initiatives approach conclusion," he said.

The broker has maintained its "low-end-of-the-range" 2013 pre-tax profit forecast of £710m ahead of Kingfisher's fourth-quarter trading statement in the coming weeks, but has cut its 2014 estimate from £800m to £775m.

George said: "Our other concern is that we believe the company will be deterred from announcing a share buyback in March. First we think it is likely the company will have to create provisions for the restructuring of its UK store portfolio and second, the company might be liable for tax refund received from the French tax authorities totalling €169m."

BC

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