Kingfisher lowers full-year expectations as Poland operations drag

Kingfisher lowered its profit expectations for the full year on Tuesday despite reporting a slight increase in first-half sales of 1.1% to £6.88bn, with like-for-like sales slightly ahead of expectations.

The FTSE 100 home improvement retailer recorded a 0.1% decline in gross profit for the six months ended 31 July, to £2.495bn, as its gross margin dipped 40 basis points to 36.3%.

It experienced a 30.9% decline in operating profit and a 33.1% fall in statutory pre-tax profit, landing at £317m.

After-tax profits also dropped by 36.5%, coming in at £237m.

Regionally, Kingfisher saw a boost in sales from the UK and Ireland, thanks to substantial market share gains at Screwfix, with a like-for-like increase of 1.7%.

In contrast, France saw a like-for-like decline of 3.8%, with Brico Dépôt showing weaker results than Castorama.

Poland presented the most significant like-for-like drop of 10.9%, affected primarily by more robust year-on-year comparisons and a weaker second-quarter performance.

Categorically, core and 'big-ticket' sales, which account for 78% of total sales, held relatively steady with a like-for-like drop of 1.0%.

On the other hand, seasonal sales experienced a more significant like-for-like decline of 5.9%.

However, an upward trend was seen in the second quarter, aided by favourable UK weather conditions during May and June.

Kingfisher said it remained committed to its strategic investment priorities, notably in e-commerce, marketplace, data and retail media sectors, developing its Screwfix brand and enhancing trade propositions.

The first half adjusted pre-tax profit was down 28.8% at £336m, which, despite the UK and Ireland and France’s performances slightly exceeding expectations, was mainly attributed to Poland's underwhelming results.

Looking ahead, Kingfisher revised its full-year adjusted profit before tax guidance from the earlier £634m to around £590m in a move influenced by its first-half results and the current trading environment.

Despite that, Kingfisher anticipated achieving more than £500m in free cash flow for the year.

The firm also expressed confidence in its shareholder returns, having returned more than £260m in the first half.

Strengthening that commitment, Kingfisher announced a new £300m share buyback programme, following its recent £600m in buybacks over the last two years.

“Our like-for-like sales in the first half were slightly ahead of expectations, against a backdrop of unseasonal weather and ongoing macroeconomic challenges in our markets,” said chief executive officer Thierry Garnier.

“We saw good growth in our UK banners, with Screwfix gaining significant market share.

“At the same time, we faced strong comparatives and a weaker trading environment in Poland, while consumer confidence in France is at a 10-year low.”

Garnier said overall, demand for Kingfisher’s core and 'big-ticket' categories was healthy, while the firm was pleased to see an improving volume trend in those categories through the half.

“We continue to make strong progress against our strategic priorities - e-commerce sales were up 7% in the first half, supported by the continued success of our online marketplaces.

“B&Q's marketplace sales reached 33% of its e-commerce business in July.

“We leveraged our data science capabilities to develop AI-powered solutions such as our markdown tool, which in early pilots at B&Q delivered a very encouraging margin improvement on clearance products.”

Thierry Garnier added that Kingfisher also advanced its retail media plans through new partnerships to accelerate advertising income.

At the same time, it continued to invest in dedicated ranges, tailored services and expert colleagues to better serve trade customers across all of its banners, including launching 'Pro' zones in 27 stores in France and Poland.

“Further, with nine Screwfix stores now open in France, including four new stores in the first half, customer momentum is building.

“We are now planning for up to 20 store openings this year.

“These early results in France have encouraged us to take the next step in our international expansion journey, and we are today announcing the launch of Screwfix in the third quarter as a pure-play online retailer in up to 20 European countries.”

Garnier said trading in the UK and Ireland continued to have positive momentum.

“However, to better reflect our performance in H1 and the trading environment in our markets, we have updated our profit guidance for this year and are proactively managing our operating costs accordingly.

“We remain very positive on the medium-to-long term outlook for home improvement growth in our markets and confident in our ability to grow market share and deliver on our medium-term financial objectives.

“Underscoring this confidence, we are today announcing a new £300m share buyback programme, starting in early October.”

Reporting by Josh White for Sharecast.com.