Kingfisher lifts profit forecast amid challenging market conditions

Kingfisher, owner of BQ and Screwfix, has raised its annual profit guidance in spite of softer market conditions in the United Kingdom and Poland. Shares in Kingfisher climbed by five per cent to 307 pence after the group set its full year adjusted pre tax profit expectations between 540 million and 570 million pounds, up from the previous upper range of 480 million to 540 million pounds.

During the third quarter, like for like sales increased by 0.9 per cent on a constant currency basis, although this was lower than the two per cent growth seen in the second quarter. Overall group sales rose by one per cent year on year to 3.25 billion pounds for the three months to the end of October. This growth was supported by robust demand for significant categories such as kitchens and bathrooms.

Thierry Garnier, chief executive of Kingfisher, stated that the company delivered another quarter of volume led growth, underpinned by strategic advances in ecommerce and trade, as well as strong performance in core and high value categories. He added that the group’s progress in cost control and margin discipline had provided confidence to upgrade profit guidance despite market headwinds.

In September, Kingfisher shares saw gains when the company raised annual profit guidance driven by increased demand for home improvement products. However, the group acknowledged ongoing challenges, including a weaker labour market, persistent inflation, and the prospect of higher taxes. Britain and France remain Kingfisher’s largest markets among the eight countries in which it operates more than two thousand retail outlets. Brands under the group’s portfolio include Castorama and Brico Dépôt in France, in addition to Koctas in Turkey.

The pandemic period marked a high point for Kingfisher, with profits surpassing one billion pounds in the twelve months to March 2022 and the share price peaking above 370 pence. Since then, performance has slowed amidst a rising cost of living and a challenging comparative base. The French division, comprising thirty per cent of group sales and currently undergoing restructuring, has been particularly affected by economic and political instability, necessitating lower profit expectations last year.

For the latest quarter, sales in the United Kingdom rose by 4.2 per cent, mainly driven by Screwfix. Sales in France grew by 0.7 per cent, while the Polish division increased by 2.9 per cent. However, on a constant currency basis, sales in France and Poland fell by 2.6 per cent and 1.2 per cent respectively, reflecting subdued consumer demand in line with broader market trends.

Kingfisher recently completed the third tranche of its planned 300 million pound share buyback programme and has so far returned 175 million pounds to shareholders. Analysts at RBC noted that Kingfisher has succeeded in strengthening its digital and trade offering in the United Kingdom, positioning it well to expand these initiatives in other markets. They suggested that while DIY trends may remain resilient as consumers seek to economise and enhance their homes, Kingfisher benefits from strong operating leverage on like for like sales growth.