Kingfisher Profits Slump 39% As Retailer Suffers Following Covid Reopening

Profits at home improvement retailer Kingfisher slumped in its last fiscal year following the end of Covid-19 lockdowns.

At £611 million, pre-tax profits fell 39.3% year on year during the 12 months to January. Adjusted profit at the FTSE 100 firm dropped 20.2% to £758 million, although this was at the top end of expectations.

Kingfisher — which owns the B&Q and Screwfix banners in the UK, and Castorama and Brico Dépôt stores across other European markets — saw sales drop 0.9% year on year to £13.1 billion. On a like-for-like basis revenues were down 2.1% from financial 2022.

‘Do-it-yourself’ (or DIY) retailers thrived during the pandemic as lockdowns boosted people’s interest in home improvement. But sales of paintbrushes, hammers and other products have fallen sharply following post-Covid reopening.

Adjusted pre-tax profit margins at the company dropped in fiscal 2023 due to investment in expansion, higher labour costs and increased energy bills. These fell 140 basis points to 5.8%.

The company decided to keep the full-year dividend frozen at 12.4p per share.

Big Plans

For the current year Kingfisher said it was “comfortable” with analyst forecasts for adjusted profit before tax to rise to £633 million in this financial year.

It has also predicted sales growth of 1.9% on a headline basis, or 0.5% from a like-for-like view.

Chief executive Thierry Garnier said that “across all our markets, sales have remained resilient in both DIY and DIFM/trade channels, with like-for-like sales 15.6% ahead of pre-pandemic levels.”

He commented that “we have maintained a sharp focus on pricing to deliver value to our customers during this challenging period for household finances, while at the same time managing our cost inflation pressures effectively.”

The company also announced fresh plans to supercharge online sales. Following recent e-commerce marketplace launches in the UK, Spain and Portugal, it has set an internet sales penetration target of 25%. Penetration stood at 16.3% in the last financial year.

Kingfisher is on course to launch new internet marketplaces in France and Poland, and to introduce changes to Click and Collect and its delivery service.

The business also plans to open 60 more Screwfix stores in the UK and 25 in France in the new year. Further afield, it is looking to open 80 medium-box and compact Castorama stores in Poland over the next five years.

Mixed Reaction

Adam Vettese, analyst at investing firm eToro, commented that Kingfisher has gone from “a pandemic darling to a relative struggler” during the space of a year.

He said that “while the owner of B&Q has beaten consensus forecasts for both revenue and earnings, it has regressed on nearly every key financial metric over the past year.”

However, Steve Clayton, head of equity funds at Hargreaves Lansdown, noted that “the market took the messaging positively, pushing the stock up almost 3% in early trading.” Kingfisher’s share price has fallen back since then and it was last flat on the day.

He commented that “sales are double-digits ahead of their pre-pandemic levels” and that the FTSE business is “pointing to a stronger performance in the current financial year.”