Kingfisher (LSE: KGF) shares fell as hard as most when the stock market crash kicked off. The FTSE 250 home improvement specialist also came back with the rest of the market. But when the general recovery faded in June, the Kingfisher share price just kept on going. It’s now up 32% year-to-date, which would be a cracking return any year.
A Q3 update Thursday confirmed what we essentially knew already, that sales are soaring. It seems that, while locked down and unable to spend all our money in the pubs, we’re turning to ordering stuff to do up our homes instead. Sales in the quarter jumped by 17.6% to £3.5bn at constant currency. The firm’s e-commerce sales rocketed by 153%, and now account for 17% of total sales.
Beating the FTSE 250
But is this gain already accounted for in the Kingfisher share price? It’s wiped the floor with the FTSE 250 itself, which is down 10%. But what will happen when when we’re past all these lockdowns? Will online sales start to fall off again, and will people find better places to spend their money in general?
I suspect we will see a softening on sales once we’re past the coronavirus crisis. And the markets are already marking Kingfisher shares down. Since a peak in late October, the share price has given up some of its gains and fallen 13%. That’s while both the FTSE 100 and FTSE 250 have been climbing.
Analysts predict a 40% rise in earnings this year, but they have a 14% drop penciled in for next year. Will that be a one-off fall back from 2020’s spending? Or will the trend of falling earnings at Kingfisher resume? Even the elevated earnings forecast for this year would only just beat 2017’s. I’m going to hold off and see.
Small-cap champion
If we want to see a stock that’s gyrated more wildly than Kingfisher this year, we need look no further than Halfords Group (LSE: HFD). The Halfords share price plunged by as much as 70% in the early days of the crash. But since hitting bottom in March, Halfords has staged one of the best recoveries of the year.
At the time of writing, Halfords shares are up 48% year-to-date. Never mind FTSE 100 or FTSE 250 shares, this small-cap share has beaten most others hands down.
Halfords shareholders were at little more than breakeven before a trading update on 1 October resulted in a huge spike. With trading going a lot better than expected, especially in the firm’s cycling business, Halfords predicted a pre-tax profit for the first half of more than £55m.
Beating expectations
That was confirmed Wednesday, with a profit figure of £56m. That came from a 9.6% rise in revenue. Similar to Kingfisher, Halfords recorded a 148% jump in online sales. The company is still cautious over the outlook for the second half, “given the seasonality of our business and the ongoing impact of Covid-19.” But I wouldn’t bet against it. And with a forecast P/E of only 10.3 for the 2021-22 year, I reckon Halfords shares are still good value.
I’ve been concentrating mostly on FTSE 100 stocks for safety in this tough year. But these two show what gains I could miss if I ignore the FTSE 250 and Small Cap indexes.