RBC Capital Markets has named Kingfisher PLC (LSE:KGF), B&M European Value Retail SA (LSE:BME) and Next PLC (LSE:NXT) as its preferred UK retail investments heading into a challenging period for the housing sector.
The broker predicted that the housing market would “hold up rather than surge,” signalling a cautious but not catastrophic outlook for home-related consumer spending in the UK.
RBC noted that subdued housing activity and fragile consumer confidence would continue to weigh on spending tied to home improvement and furnishings across the country.
Despite this difficult backdrop, the broker identified several factors that could provide meaningful relief, including stable interest rates, real wage growth, and company-specific operational improvements.
A persistent regional divide between northern and southern England also featured prominently in RBC’s analysis, with house prices remaining stronger across northern England, Scotland, Wales and Northern Ireland.
London and the South East continued to struggle by comparison, creating a geographic dynamic that favoured retailers with lower exposure to the capital and its surrounding region.
Kingfisher, B&M and Dunelm Group PLC (LSE:DNLM) were all seen as relatively underexposed to London, positioning them to benefit from this ongoing regional divergence in property market performance.
Home-related products accounted for almost all of Dunelm’s sales, just over half of Kingfisher’s total, and around a quarter of B&M’s overall revenue mix.
RBC also flagged potential for an “improve not move” trend, as high transaction costs push more households toward renovating existing properties rather than trading up or relocating entirely.
Kingfisher was highlighted as well placed to grow trade sales through its TradePoint loyalty scheme and to expand B&Q’s online marketplace, with around half of that marketplace’s customers reportedly new to DIY.com.
Notably, 15% of those new marketplace customers subsequently went on to purchase a B&Q own-brand product, underscoring the platform’s role in driving brand engagement and cross-selling.
B&M’s path to improvement was framed around returning its focus to retail basics, with RBC emphasising store execution and a sharper commitment to value for money as the key levers for growth.
Next’s investment case was described as less reliant on the UK housing cycle, with international sales approaching 25% of group revenue and the US market offering scope for rapid expansion from a relatively low base.
RBC retained ‘outperform’ ratings on all three companies, with Kingfisher trading at 11 times forecast 2027 earnings, B&M at 10 times and Next at 17 times.
