B&Q store in West London
DIY retailer Kingfisher has warned profits for the year to January 2025 will disappoint / Image source: Adobe
  • Annual profits plunge 25%
  • FY25 guidance downgraded
  • DIY retailer issues cautious outlook

Home improvement giant Kingfisher (KGF) has warned profits for the year to January 2025 will fall short of City forecasts.

The latest earnings alert will heap further pressure on chief executive Thierry Garnier to accelerate the B&Q-to-Screwfix owner’s turnaround plan, having already stripped significant costs from the business.

The FTSE 100 retailer, whose other banners include Castorama and Brico Depot in France, said it was cautious on the market outlook for 2024 due to ‘the lag between housing demand and home improvement demand’, sending the shares 2.1% lower to 229p in early deals on Monday.

Adjusted pre-tax profit tumbled 25% to £568 million in the year to January 2024 and the DIY products seller now expects a further decline to within the £490 million to £550 million range this year, well below the £560 million called for by consensus.

UK PROGRESS MASKED BY FRANCE, POLAND
Total sales softened 1.8% to £12.98 billion last year including a 3.1% like-for-like revenue decline, while Kingfisher’s retail profit was down almost 20% to £749 million with margins contracting from 7.1% to 5.8%.
However Kingfisher, which recently kickstarted a fresh £300 million share buyback, delivered a significant year-on-year free cash flow improvement and held the total dividend at 12.4p.
While Kingfisher generated positive UK & Ireland sales with B&Q, Screwfix and trade-focused banner TradePoint each delivering market share gains, this progress was offset by the ‘more challenging’ consumer backdrop in France and Poland which impacted trading.
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SIGNS OF IMPROVEMENT

Kingfisher said like-for-like sales in the first quarter-to-date were down 2.3%, but it highlighted an improving trend in the UK & Ireland, France and Poland versus last year’s fourth quarter as well as better volume trends.

The retail giant is also initiating a new plan to simplify its business in France, where the market has been impacted by low consumer confidence, and to significantly improve the profitability of Castorama.

WHAT DID THE CEO SAY?

Despite Kingfisher’s recent cycle of downgrades driven by inflationary pressures, the cost-of-living squeeze and unseasonable weather, Garnier remains confident in ‘the attractive growth prospects of the home improvement industry and our ability to grow ahead of our markets’.

In the short term, while repairs, maintenance and renovation activity on existing homes continues to support resilient demand, he is ‘cautious on the overall market outlook for 2024 due to the lag between housing demand and home improvement demand. Against this backdrop we will remain agile and focused on what is within our control - leveraging our strategy to deliver market share growth, driving productivity gains, and managing our costs and cash effectively.’

THE EXPERT’S VIEW

Russ Mould, investment director at AJ Bell, commented: ‘As is often the case, profit warnings have come in threes for B&Q-owner Kingfisher. The company is being held back by its overseas operations and investors can only hope the progress the group has recently made with its UK business can be replicated in France and Poland.’

Mould observed that in the UK, Kingfisher has ‘done a decent job of putting its B&Q and Screwfix operations back on track, taking market share as it gets the basics of managing stock levels and getting the right product to the right people at the right time.

‘The company has also drastically improved its online presence, though it still expects a lag between a slight improvement in housing market conditions to fully feed through to demand.

‘It will hope taking similar measures to those it has implemented in the UK will improve its prospects beyond these shores. If not, questions may be asked about the role these businesses play for the wider group and if the geographic diversification is worth maintaining in the long term.’

DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.

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Issue Date: 25 Mar 2024