ii view: confidence building at DIY chain Kingfisher

First-half results to 31 July

• Like-for-like sales down 2.4% to £6.76 billion
• Adjusted pre-tax profit down 0.5% to £434 million
• Interim dividend unchanged at 3.8p per share
• Net debt down 10% to £1.95 billion
• Ongoing £300 million share buyback programme to March 2025

Guidance:

• Now expects full-year adjusted pre-tax profit of between £510 million and £550 million, improved from a previous £490-550 million

Chief executive Thierry Garnier said:

"Trading overall in the first half was in line with our expectations. This was underpinned by customers continuing to repair, maintain and renovate their existing homes, driving resilient volume trends in our core product categories. As expected, demand for 'big-ticket' categories has remained weak, in line with the broader market, while seasonal category sales trends have improved since early July. Against this backdrop we maintained a strong focus on effectively managing our costs and inventory.

"With positive early signs of a housing market recovery, notably in the UK, Kingfisher is strongly positioned for growth in 2025 and beyond."

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ii round-up:

Kingfisher (LSE:KGF) is an international home improvement retailer which operates across eight European countries including the UK and Ireland, France, and Poland.

Just over 1,240 stores are located in the UK & Ireland, with 221 in France and 106 in Poland. Its 369 Turkish stores are operated as a 50:50 joint venture. 

Group brands include B&Q, Castorama, Brico Dépôt, Screwfix, TradePoint and Koçtaş in Turkey.

For a round-up of these latest results announced on 17 September, please click here.

ii view:

Tracing its roots back to 1982, DIY retailer Kingfisher today sells its products and services to both consumers and trade professionals. Competing against such rivals as Wickes Group (LSE:WIX), Howden Joinery Group (LSE:HWDN), Dunelm Group (LSE:DNLM) and Topps Tiles (LSE:TPT), the UK and Ireland accounts for its biggest slug of profits at 77% during this latest period, followed by France at 16% and other international markets including Poland the balance of 7%. 

Group-wide strategic focus includes growing sales to trades, expanding online sales, concentrating on smaller store formats and using AI to identify selling opportunities. Specific moves to improve its challenged French business include converting underperforming Castorama stores into the more profitable Brico Dépôt format and potentially rolling out a possible 600 Screwfix stores against the current 25 total. 

For investors, the tough economic backdrop for customers, particularly in France given pressure to reduce public spending, cannot be overlooked. The weather remains a key influence on sales, group costs such as wages have increased, while losses were made at both its Turkish and Romanian businesses during this latest period. 

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To the upside, e-commerce sales continue to grow, rising 8.4% during this latest period and now accounting for 18.3% of total sales, up from 16.8% in 2023. Costs for its challenged French business reduced 3% during the period with overall group-wide cuts of £120 million being targeted for the full year. Increased trade sales include plans to double their penetration in France and Poland over the medium term, while group net debt reduced 10% year-over-year to £1.95 billion. 

For now, and with adjusted pre-tax profit still potentially in decline year-over-year on renewed management estimates, room for caution persists. That said, ongoing initiatives, likely further interest rate cuts and a forecast dividend yield of close to 4% are all likely to offer grounds for continued investor support.    

Positives: 

• Diversity of geographical locations and brand names
• Attractive dividend yield (not guaranteed)

Negatives:

• Uncertain economic outlook
• The weather can impact performance

The average rating of stock market analysts:

Hold