Home improvement retailer Kingfisher (KGF) continues to take share in a booming market for DIY products and has upgraded its full year profit outlook following a good start to the fourth quarter.
However, the shares fell 4.4% to 322.5p as investors focused on a 2.4% third quarter like-for-like sales decline. B&Q’s same-store revenues reversed 5.6% as the FTSE 100 retailer lapped strong, pandemic-boosted comparatives.
PROFIT GUIDANCE UPGRADE
The home improvement giant behind the B&Q, Screwfix and Castorama outlets now expects annual adjusted pre-tax profit to be towards the higher end of its previously guided £910 million to £950 million range.
Second half like-for-like sales are also forecast to be towards the higher end of earlier guidance for a fall of between 7% to 3% as Kingfisher laps demanding prior-year comparables.
Kingfisher’s two year like-for-like sales were up 15% for the third quarter to October 2021, with B&Q ahead by 17.1% and Screwfix up 13% on a two-year same-store basis, amid growth in footfall and average transaction value.
And the French business continued to grow sales ahead of the market in the quarter thanks to strong performances at both the Castorama and Brico Depôt chains.
STRONG MOMENTUM CONTINUES
Kingfisher said it has made a ‘good’ start to the fourth quarter too, with like-for-like sales to 13 November ahead by 13.2% on a two-year basis.
‘These are even stronger sales trends given the backdrop of an increasingly “normalised” consumer spending environment’, said CEO Thierry Garnier. ‘Demand remains supported by what we believe are enduring new industry trends, including more working from home.’
Garnier added that Kingfisher is pushing forward with ‘investments in key areas of the business to drive long-term growth, including further enhancements to our e-commerce proposition and Screwfix’s launch in France.’
And with supply chain disruption hurting the wider retail sector, Garnier stressed Kingfisher’s product availability is ‘amongst the best in our industry’, which has supported market share gains and ‘allowed us to upweight promotional initiatives in the quarter. We have also continued to manage inflation pressures effectively, while retaining highly competitive pricing.’
Kingfisher also announced that it has completed £67 million of its £300 million share buyback programme to date.
THE EXPERT’S VIEW
AJ Bell investment director Russ Mould commented: ‘Lockdown winners were always going to face tough year-on-year comparatives in 2021 and no more so than Kingfisher. The DIY boom that kicked off in 2020 has had considerable legs and still shows positive momentum.
‘Unfortunately, it’s very hard to grow by a very large amount two years in a row, and so Kingfisher is now lamenting a drop in third quarter like-for-like sales.
‘Most companies are comparing their latest takings to those of two years earlier, to see progress from a pre-Covid world to now. On that basis, Kingfisher is still doing very well. Furthermore, the company’s fourth quarter has got off to a bang.’
Mould added: ‘Supply chain and inflation issues don’t appear to be having any catastrophic impact on the business. Kingfisher says its product pricing remains competitive, and logistics and product availability seem to be under control. So, all things considered, demand remains good and it’s coping with industry-wide pressures, which must be a win in anyone’s books.’
