Kingfisher, the owner of B&Q, has increased its forecast for its lower end despite a weaker demand for high-ticket items. Its French business is also still struggling.
As a result of signs that the housing market is improving in Britain, DIY retailer Screwfix said they expected a pre-tax adjusted profit between £510 and £550 millions. This is an increase from the previous guidance of £490 to £550 millions.
Following the update, shares of Kingfisher increased by 20p or 7 percent to 310p.
After the pre-tax profit grew by 2.3% to £324 millions in the six months ending July, the tightening of the guidance was a result.
During the same time period, however, sales dropped by 1.8% to £6.9billion. Similar sales, those of stores that have been open for at least one year, were down 2.4% across the group. This includes outlets in Europe and the UK.
Thierry Garnier’s chief executive blamed a “weak” market for high-priced products like bathrooms and kitchens. These items dropped 6.8 percent year-on-year.
The sales in France dropped by 7.2% year-on-year due to the “soft consumer background”. Garnier stated that “that market is really, very weak”. He added that the “perception” of inflation in France, was higher than the UK. Political uncertainty also contributed to the problems.
Kingfisher reported that it had made “rapid progress”, with its restructuring plan, for its Castorama France chain. “Works completed or underway on 13 stores with low performance”. Operating costs were down by 3 percent in the country.
Kingfisher operates more than 2,000 stores in eight countries. Britain and France are its two biggest markets. Koctas is one of its brands in Turkey.
During the pandemic, the FTSE retailer saw a surge in DIY product demand as people took advantage of the lockdowns and spruced up their homes. The profits topped £1 billion during the year ending March 2022. Shares peaked at over 370p. Since then, the company has seen a drop in sales due to a slower demand, a cost-of-living crisis, and difficult comparatives. Kingfisher warned last year that the weak economy could wipe out its profits for the year.
Garnier has been trying to turn the group around since 2019. He pointed out that the improvement in mortgage rates since the second quarter was “early positive news” for the housing market. “We think there’s still a nine-to-12-month lag. Over time, then, the market will improve.
Kingfisher has said that it is on track to reduce costs by about £120,000,000 for the entire year. This will be a weighted average of the first half.
The company has maintained its interim dividend of 3.80p per share. The company expects to finish its £300,000,000 share buyback before March of next year.
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