- Q3 like-for-likes down 1.1%
- Top end of profit guidance lowered
- Rising costs to crimp 2026 profits
Home improvement giant Kingfisher’s (KGF) sales missed guidance for the third quarter, with the retailer suffering a 6.4% revenue plunge in its second largest market, France, prompting the B&Q-to-Screwfix owner to lower the top end of its full year 2025 profit guidance.
The DIY group also warned rising national insurance costs on both sides of the channel, combined with a higher finance bill, will crimp full year 2026 earnings, disappointing news that sent the shares crashing 12% lower to 259p.
BUDGET UNCERTAINTY WEIGHS
Consumer uncertainty in the UK and France weighed on sales in the quarter to 31 October 2024.
Total sales weakened 0.6% to £3.2 billion, below the £3.3 billion called for by consensus, while like-for-like sales down 1.1%.
While Kingfisher benefited from solid underlying trading in August and September, October’s sales proved weak amid consumer uncertainty in the UK and France caused by uncertainty related to government budgets in both countries.
Despite wetter and milder than normal weather in October, like-for-like sales edged up 0.4% in the UK and Ireland, with growth driven by Screwfix, TradePoint and B&Q’s e-commerce marketplace.
In France, where the company trades as Castorama and Brico Depot, like-for-like sales fell 4.3% as both banners endured a tough October due to weak consumer sentiment and adverse weather.
WHAT DID THE CEO SAY?
‘All our banners in the UK, France and Poland performed in line or ahead of their respective markets, with particularly strong market share gains at Screwfix,’ said CEO Thierry Garnier.
‘We continued to see improved volume trends in our core categories, supported by repairs, maintenance and existing home renovation. As expected, sales of our “big-ticket” categories remained soft, although we are seeing early signs of improvement.’
Although trading has picked up in the fourth quarter to date, Kingfisher now expects adjusted pre-tax profit of between £510 million and £540 million for the year to January 2025.
That’s down from the previously guided £510 million to £550 million range. Free cash flow guidance of £410 million to £460 million was left unchanged and Kingfisher is on track to complete its £300 million share buyback programme in March 2025.
Turning to the year to January 2026, Kingfisher warned the higher employers’ NICs (National Insurance Contributions) arising from Rachel Reeves’ Autumn Budget will add approximately £31 million to its expenses and it will also have to absorb higher finance costs next year.
In France, changes to social taxes, the equivalent to UK NICs, as well as the postponement of the abolishment of a sales-based tax, will add another £14 million to Kingfisher’s costs.
‘The combination of these measures in the UK and France is therefore circa £45 million on group retail profit,’ warned the company.
‘We are developing a range of additional mitigations, but at this stage expect to offset only part of this impact.’
THE EXPERT’S VIEW
AJ Bell investment director Russ Mould observed that Kingfisher has a growth problem and until the backdrop radically improves, the company is ‘stuck in quicksand, slowing sinking. The home improvement retailer continues to keep its chin up and offer reasons to be optimistic, but in reality, there is always something holding it back.’
Mould added: ‘Consumers have tightened their belts amid uncertainties around policy changes from new governments in the UK and France – two of its major operating regions. That’s caused a wobble to sales.
‘It also faces significant headwinds from various tax changes and there is only so much these can be offset by finding new cost efficiencies. Consumer sentiment remains patchy and economic growth lacklustre, which suggests darker days ahead for Kingfisher.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.
