Kingfisher shares are up over 22% this year as the rally in retail stocks sees no signs of slowing down.

But, the stock has gained 1.68% so far this week after a recent upgrade at Jefferies. Analyst James Grzinic upgraded the home improvement retailer to Buy from Hold and raised the firm’s price target to 330p, up from 240p.

The analyst adjusted ratings in the UK general retailers sector to account for ongoing sequential deflation in energy prices. However, the analyst said that Kingfisher displays the greatest valuation/forecast upside to current inputs.

Our view: Over recent months, UK stocks have performed particularly well, and rightfully so given resilient earnings towards the end of the year.

However, home and furniture could likely be the hardest hit sector in 2023, as soaring interest rates reduce demand for new homes and likely reduce the number of people placing their homes on the market.

As seen from the above chart, mortgage lending has fallen considerably at the start of this year as demand for new housing continues to be hit by high inflation and rising borrowing costs.

Therefore, the demand for investments in DIY projects and the demand for Kingfisher brands such as B&Q, Screwfix, Tradepoint and much more could potentially be stifled this year.

By Jamel Boughedda