ii view: income play Kingfisher stays confident

A diversity of brands and a forecast dividend yield of around 4.5%. Buy, sell, or hold?

First-quarter trading update to 30 April

• Revenue down 5.8% to £3.25 billion
• UK & Ireland sales down 14.2% to £1.57 billion
• French sales down 6.3% to £1.1 billion
• Other international sales up 30% to £575 million
• New share buyback programme totalling £300 million

Guidance: 

• Continues to expect full year adjusted pre-tax profit of £770 million 

Chief executive Thierry Garnier said:

“While facing very strong comparatives in the prior year, our continued strategic progress has enabled us to retain a significant proportion of the increased sales during the pandemic. We continue to effectively manage inflationary and supply chain pressures. Looking forward, we are reiterating our profit guidance for FY 22/23.”

ii round-up:

Kingfisher (LSE:KGF) is a multiformat home improvement retailer with over 1,450 outlets. 

It trades from eight European countries including the UK and Ireland, France and Poland, and employs over around 80,000 people. 

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

For a round-up of this latest update, please click here.

ii view:

Founded in 1982, today this FTSE 100 index constituent generates annual sales of over £13 billion. The UK and Ireland account for its biggest slug of sales at just under a half, then comes France at just over a third, with the balance made by up other International or European nations. Under its former Carrefour chief executive, strategic priorities include growing e-commerce related sales, expanding its relationship with trade customers and adapting its store footprint.  

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For investors, an uncertain economic outlook and a cost-of-living crisis for consumers cannot be ignored. Rising interest rates and their potential to slow housing and construction related activity also warrant consideration. As does competition from the likes of Toolstation owner Travis Perkins (LSE:TPK) and Wickes Group (LSE:WIX).  

On the upside, market share gains have helped same store sales grow over the last three years. E-commerce sales now account for 16% of overall company sales compared to just 7% prior to the pandemic, supply chain challenges are being managed and a focus on costs continues. On balance, and while some caution looks sensible, a new share buyback programme and an estimated future dividend yield of around 4.5% looks to offer reason for existing shareholders to at least stay patient. 

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