- Sales still growing despite weak consumption
- Overseas operations showing good momentum
- Full year guidance trimmed
DIY retail group Kingfisher (KGF) posted a solid third quarter trading update but lowered its full year profit outlook due to what it called the ‘challenging’ outlook for consumer spending.
Having rallied 25% from their late October low, the shares gave back some ground dipping 1.6% to 250p in early dealing.
SALES HOLDING UP
Revenues for the three months to the end of October were 1.7% higher on a constant currency basis and 0.2% higher on a like-for-like basis at £3.26 billion driven by strong demand for energy-efficiency products.
Compared with their pre-pandemic level, sales for the period were up 15.3% which the firm put down to continued market share gains and a more than doubling of online sales.
There was a good start to the fourth quarter with sales up 2.6% on last year and 16.2% up on 2019 on a like-for-like basis.
By business, the core B&Q brand saw like-for-like sales drop 2.3% in the third quarter while Screwfix sales were only slightly lower.
Sales in France, which make up a third of the group total, were slightly higher on an underlying basis while sales in the rest of Europe which make up around 20% of the total were up 6.7% thanks to successful launches in Spain and Portugal and growth in the DIY market.
The firm said it had good product availability though its supply chain management and was able to mitigate input cost inflation while still offering customers value.
However, full year pre-tax profits are now seen ranging between £730 million and £760 million compared with previous guidance of £770 million meaning a downgrade of 5% using the low end of the new range.
BETTER THAN MIGHT BE EXPECTED
One reason why the shares haven’t fallen more today is that despite the cut to earnings the firm seems to be showing ‘impressive resilience in its recent trading’, says AJ Bell investment director Russ Mould.
‘The need to ensure homes are energy efficient and to save on exorbitant heating bills are another driver of business which could persist over the medium term. Kingfisher’s launch of energy-saving tools to help consumers find the right products and services looks smart’, adds Mould.
Kingfisher’s sales certainly seem to be performing better than the general market for home improvement goods.
According to the ONS (Office for National Statistics), sales of hardware including paint, timber and glass have been falling all year in value terms, registering a drop of 7.3% last month while sales of all non-food items rose 1.4% by comparison.
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Disclaimer: Financial services company AJ Bell referenced in this article owns Shares magazine. The author (Ian Conway) and editor (Steven Frazer) of this article own shares in AJ Bell.
