Shares in B&Q-owner Kingfisher (KGF) climbed 10.9% to a fresh one-year high of 249.7p on Wednesday after the home improvement giant forecast that adjusted pre-tax profit for the first half to 31 July would be ahead of last year, despite the impact of lockdown in March and April.

Having recently re-entered the ranks of the FTSE 100, the DIY retailer confirmed that store and online sales have remained strong and the bottom line is benefiting from cost reductions.

POSITIVE MOMENTUM

Last month (17 June) Kingfisher, whose other retail banners include Screwfix in the UK and Castorama and Brico Depot in France, announced bumper like-for-like sales growth for the second quarter up to 13 June.

This reflected strong e-commerce growth and the phased reopening of stores in the UK and France from mid-April.

Today, with the end of the second quarter in sight, the essential goods retailer confirmed like-for-like sales are still running over 20% up with online sales tracking an impressive 200% higher.

Group like-for-like sales surged 21.6% higher in the second quarter up to 18 July, although year to date group like-for-likes are still down 3.7%.

Guided by chief executive Thierry Garnier, Kingfisher has continued to experience strong demand across its markets with many people stuck indoors and looking for DIY projects to spruce up their homes and occupy themselves.

Kingfisher’s stores are better positioned than other retailers to adapt to social distancing too, as they typically cover a reasonably large footprint.

VISIBILITY REMAINS LOW

‘The operational and financial actions we have taken, together with the strong demand for home improvement we are currently seeing, give us a sound footing in the current crisis and beyond,’ insisted Kingfisher, although the retailer didn’t provide specific financial guidance for the 2020-21 financial year.

‘While we are entering the second half with a favourable trading backdrop, second half visibility remains low given uncertainty around COVID-19 and the wider economic outlook.’

Irish stockbroker Davy commented: ‘Kingfisher’s unscheduled update adds to the view that the new management team is already having a positive effect on the group’s performance. The good momentum in sales has persisted into July and adjusted first-half profits will be better than anticipated. The full repair of Kingfisher will take time but early signs are encouraging.’

AJ Bell investment director Russ Mould said: ‘The big question for Kingfisher is can it sustain the sales growth momentum? As more people return to work and lockdown measures start to ease, consumers’ focus could easily shift away from the home and back to the lifestyle they once enjoyed.

‘Kingfisher has been trying to fix its business for years with limited success and so management really need to stay focused on their own repair job rather than celebrating short-term gains.’

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Issue Date: 22 Jul 2020