High-flying retailer Kingfisher (KGF) has reported bumper first quarter sales and raised guidance for the first half of its financial year as the home improvement giant continues to ride the Covid-driven DIY boom.
Management now expects first half group like-for-like sales growth in the mid-to-high teens, up from previous guidance of low double-digit growth, and has upped adjusted pre-tax profit guidance to between £580m and £600m accordingly.
Yet shares in Kingfisher, which have rallied spectacularly off the March 2020 bottom, softened 1.3% to 371.3p on profit taking as investors priced in demanding sales comparatives to come as well as the impact of supply chain challenges and inflationary pressures on the business.
Q1 SALES BOOM
For the first quarter ended 30 April 2021, Kingfisher’s like-for-like sales surged 64% higher while two-year like-for-likes - compared with the pre-pandemic period in 2019 - grew by an a very impressive 23%.
The B&Q-to-Screwfix owner saw strong demand in the UK and in France, where it trades as Castorama and Brico Depot, not to mention continued e-commerce sales progress with two-year growth of over 250%.
Total sales rose 62% to £3.4 billion amid strong demand in all categories and also reflecting easy-to-beat comparatives due to some temporary store closures last year.
‘We continue to see high levels of demand from both new and existing customers,’ enthused CEO Thierry Garnier, ‘with clear progress made on our “Powered by Kingfisher” strategic priorities’, which include the recent launch of Screwfix as an online brand in France.
‘Whilst the second half of the financial year remains naturally uncertain, we continue to see supportive long-term trends for our industry and are confident of continued outperformance of our wider markets’, he added.
LAPPING TOUGH COMPARATIVES
Garnier also flagged a positive start to the second quarter, with like-for-like sales to 15 May up 8.2% amid continued strength in the UK and France and with a boost from the reopening of stores in Poland.
Yet for the second half, Kingfisher is sticking with its original guidance for a group like-for-like sales decline of between 15%-to-5% as it laps last year’s exceptionally strong Covid-inflated comparatives.
This guidance also reflects ‘continued uncertainty over the macroeconomic and consumer environment from Covid’.
SPANNER IN THE WORKS
AJ Bell investment director Russ Mould said today’s update suggests Kingfisher is ‘still on a roll’, albeit with expectations for a second half decline in like-for-like sales given the tough year-on-year comparatives.
‘There is a spanner in the works though’, warned Mould. ‘Product shortages are expected to last for at least the next six months, which won’t go down well with the nation of home movers and improvers.
‘Inflation is another issue, yet Kingfisher says it wants to remain competitive which suggests it will do everything to avoid pushing up prices too much for the customer. That implies its margins could come under pressure or it will have to get tough with suppliers and demand better deals.’
