Shares in home improvement retailer Kingfisher (KGF) climbed 2.7% to 287.5p on Tuesday as the B&Q-to-Screwfix owner reported an acceleration in fourth quarter like-for-like sales growth amid continued ‘strong’ demand and assured it is ‘comfortable’ with the top end of the £667 million-to-£742 million annual pre-tax profit forecast range.
Group like-for-like sales for Q4 to date (9 Jan) are up an impressive 16.9%, an acceleration from the 12.6% growth rate seen up until 14 November, supported by the lockdown-induced DIY boom as well as rapid e-commerce growth, though Kingfisher cautioned that ‘uncertainty over Covid-19 and the impact of lockdown restrictions in most of our markets continue to limit our visibility’.
DELIVERING AMID DIY FAD
Kingfisher has proved a prime beneficiary of a working from home phenomenon that has driven a new DIY fad. The FTSE 100 retailer has been on a roll since the first lockdown and the acceleration in sales growth since mid-November has been driven by its overseas territories and in particular France, where the company trades as Castorama and Brico Depot.
The retailer’s stores are currently open across its geographical territories, yet it does have to contend with some restrictions such as the temporary closure of B&Q showrooms across the UK and limits on the number of people allowed inside a store in other territories. This creates some uncertainty over the pace of future sales, and so does the fact that the pandemic is still raging.
Russ Mould, investment director at AJ Bell, pointed out that in three months’ time, longer daylight hours should provide another driver for sales as people start to think about doing up the outside of their home and working on the garden.
By that time, more consumers people will have been vaccinated and will want to start to get out of the house and begin to enjoy life again.
DOUBLE-EDGED SWORD?
Yet that could prove a double-edged sword for Kingfisher. ‘On one hand, it could see a new tailwind for sales, but on the other its captive audience will start to have more freedom and so the purple patch for DIY demand could start to fade as there will be other distractions in life,’ said Mould.
‘One could see a situation where demand remains robust for much of the year, particularly if the pace of the vaccine roll-out is slower than currently expected and many people still remain nervous about going out again for a while. However, come 2022 it is fair to say that Kingfisher will face some very tough comparative figures to beat.’
