ii view: DIY chain Kingfisher has big plans for France

Full-year results to 31 January

• Revenue down 3.1% to £12.98 billion
• Adjusted pre-tax profit down 25% to £568 million
• Final dividend unchanged at 8.6p per share
• Net debt of £2.1 billion, down from £2.3 billion

Guidance:

• Expects adjusted pre-tax profit of between £490 million to £550 million for the year ahead

Chief executive Thierry Garnier said:

“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. We continue to execute against our strategic priorities at pace, with high conviction in our multiple growth opportunities. 

“Looking forward, we remain confident in the attractive growth prospects of the home improvement industry and our ability to grow ahead of our markets. 

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ii round-up:

Kingfisher (LSE:KGF) is an international home improvement retailer which operates from more than 1,600 stores as well as online websites. 

It trades from eight European countries including the UK and Ireland, France and Poland.
Group brands include B&Q, Castorama, Brico Dépôt, Screwfix, TradePoint and Koçtaş. 

For a round-up of this latest trading update announced on 25 March, 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 74%, followed by France at 19% and other international markets including Poland the balance of 7%. Broad group strategic pushes include growing its e-commerce related sales, concentrating on smaller store formats and using artificial intelligence (AI) to sift out selling opportunities.

More specifically, a renewed focus on improving the performance of its sales pressured French division includes simplifying its management structure, converting underperforming Castorama stores into the more profitable Brico Dépôt format, and potentially increasing the number of Screwfix stores in France from 20 currently to as many as 600 over the longer term.  

For investors, the tough economic backdrop for customers, particularly in France, including now elevated borrowing costs, cannot be overlooked. Higher wages and energy costs have hurt the business, the weather and its impact on sales remains an ongoing influence, while other markets remain small with Romania generating another year of losses. 

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On the upside, e-commerce sales continue to grow rising 6.4% year-over-year with new online facilities being launched in key overseas markets France and Poland. New ScrewFix stores aimed at trade buyers are being opened both physically and online, costs remain a management focus, while further action to improve the French business is now being taken. 

In all, management's strategy and a forecast dividend yield of around 5% are attractive. That said, with housing markets still pressured and profits forecast by management to weaken in the year ahead, more cautious investors are likely to stay on the sidelines. 

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