Kingfisher’s profits slumped by a quarter last year amid subdued activity in the home improvement sector.
B&Q’s parent company revealed adjusted pre-tax profits declined by 25.1 per cent to £568.1million in the 12 months ending January following weaker results in France and Poland.
The group has also lowered its profit guidance for the year ahead, having cut expectations for 2023 in November and September last year.
In France, where Kingfisher operates Castorama and Brico Depot, it said sales were hit by ‘low consumer confidence’ and bad weather impacting purchases of seasonal products.
Fall back: Kingfisher reported a 3 per cent decline in third-quarter revenues to £3.25billion, but sales were still 15 per cent larger on a two-year like-for-like basis
At the same time, its like-for-like revenues in Poland fell by 9.5 per cent due to higher customer use of discounting and a strong prior-year comparative performance in the electricals, plumbing, heating and cooling category.
Higher salary, energy, and technology costs in all its major territories, including the UK and Ireland, also affected Kingfisher’s earnings.
The FTSE 100 group achieved modest like-for-like turnover growth in the British Isles of 0.8 per cent thanks to resilient e-commerce sales and greater demand from trade customers at Screwfix.
Yet revenues were tempered by unfavourable weather, lower demand for core and ‘big-ticket’ items and a poorer second-half performance.
Thierry Garnier, chief executive of Kingfisher, said the firm was ‘cautious on the overall market outlook for 2024 due to the lag between housing demand and home improvement demand.’
As a result, the business anticipates adjusted pre-tax profits declining even further to between £490million and £550million this financial year.
Like other DIY retailers, Kingfisher benefited significantly when Covid-19 restrictions encouraged homeowners who were spending more time indoors to spruce up their living spaces.
Trading was additionally uplifted by a temporary stamp duty holiday and a growing desire among Britons for larger living spaces.
Growth slowed as people began working less often from home and socialising more regularly again with family and friends, but also as inflationary pressures mounted and central banks hiked interest rates.
Mark Crouch, analyst at eToro, described the group’s latest results as ‘concerning’ and mark the retailer’s third profit warning in the last six months, ‘with consumers shelving plans for DIY home improvements, chipping away at Kingfishers’ bottom line’.
Kingfisher shares were 2.1 per cent lower at 228.2p on Monday morning, making them the blue-chip index’s biggest faller. Their value has dropped by around 10 per cent over the past 12 months.
Crouch added: Performance in the UK and Ireland did offer some reassurance for investors, with B&Q, TradePoint and Screwfix all delivering modest sales and market share growth.
‘So much so, the DIY retailer is pushing ahead with the expansion of their Screwfix stores across all regions, in a bid to capitalise on the success of the popular brand.
‘Interest rate cuts cannot come soon enough for Kingfisher who, like the housing market, has found itself treading water and struggling to produce any growth.
‘While the business has maintained positive cashflow and an attractive dividend, investors will be all too aware of the company’s sliding profits – which, should they continue, will crank up pressure on margins and jeopardise future returns.’
