FTSE 100-quoted Kingfisher announced another sharp fall in profits on Monday as consumer spending remained under the cosh.
At 228.3p per share, Kingfisher’s share price was last 2.3% lower at the start of the shortened week.
Revenues at the home improvement retailer dropped 0.6% during the 12 months to January, to £13 billion. On a like-for-like basis, sales were down 3.1% year on year.
Meanwhile, retail margins shrank to 5.8% from 7.1%.
As a result of these pressures, pre-tax profit sank 22.3% year on year, to £475 million. On an adjusted basis, profits were down 25.1% at £568 million.
Net debt dropped by £158 million year on year, to £2.1 billion, thanks to a net increase in cash.
The Footsie firm kept the full-year dividend locked at 12.4p per share.
Sales Reversal
Kingfisher — which owns the B&Q and Screwfix brands in the UK, and Castorama and Brico Dépôt in France — saw like-for-like sales grow 0.8% in its home market.
The firm said that its “positive performance [was] supported by resilient e-commerce and trade customer sales,” while it also enjoyed market share gains across all divisions.
On a reported basis, sales were down 8% in the UK and Ireland, at £555 million.
In France, turnover slumped 28.8% to £139 million, or 5.9% on an underlying basis.
Kingfisher described the broader French market as “weak” due to low consumer confidence. It said that Castorama was performing in line with the broader market, though trading was below par at Brico Dépôt.
Sales in its other international markets tanked 56% year on year, to £55 million, driven by poor trading in Poland. Turnover in the Eastern European territory reversed 44.5% to £82 million, or 9.5% on a like-for-like basis.
Profits Tipped To Fall Again
Chief executive Thierry Garnier said that “despite all the macroeconomic and consumer challenges in our markets over the past year, we have stayed focused on our customers and our long-term strategy.”
He said that “we remain confident in the attractive growth prospects of the home improvement industry and our ability to grow ahead of our markets,” though he added that “in the short term, while repairs, maintenance and renovation activity on existing homes continue to support resilient demand, we are cautious on the overall market outlook for 2024 due to the lag between housing demand and home improvement demand.”
Sales have continued backpeddling at the start of the new year, Kingfisher said. Like-for-like turnover is down 2.4% is down so far in the April quarter, though the firm said it had witnessed “improved sales trend in the UK and Ireland, France and Poland.”
Sales on this basis were improved from the 4.3% decline recorded in the final quarter of financial 2024.
The business expects adjusted pre-tax profit to drop to between £490 million and £550 million in the current fiscal period.
“Concerning”
Mark Crouch, analyst at eToro, described the retailer’s latest update as “concerning,” noting that “interest rate cuts cannot come soon enough for Kingfisher who, like the housing market, has found itself treading water and struggling to produce any growth.”
Crouch added that “while the business has maintained positive cashflow and an attractive dividend, investors will be all too aware of the company’s sliding profits — which, should they continue, will crank up pressure on margins and jeopardise future return.”
