Interactive Investor

ii view: is the DIY boom fading for this European retailer?

We assess prospects as holiday possibilities improve and customers return to the workplace.

29th September 2021 16:01

Keith Bowman from interactive investor

 We assess prospects as holiday possibilities improve and customers return to the workplace.

First-half results to 31 July 2021

  • Total sales up 20% to £7.1 billion
  • Pre-tax profit up 71% to £677 million
  • Interim dividend up 38% to 3.8p per share
  • Share buyback programme of £300 million
  • Third quarter like-for-like sales down 0.6% year-over-year to 18 September

Chief executive Thierry Garnier said:

"We have had a very strong first half of the year, with growth across all our categories and channels, particularly e-commerce. This is a testament to the rapid progress being made against our strategic priorities which continue to drive customer engagement and an improved competitive position in our key markets.”

ii round-up:

Kingfisher (LSE:KGF) is a multiformat home improvement retailer with around 1,400 outlets. 

It trades from eight European countries including the UK and Ireland, France and Poland and employs over 80,000 people. 

Group brands include B&Q, Castorama, Brico Dépôt, Screwfix, TradePoint and Koçtaş. 

For a round-up of these latest results, please click here.

ii view:

Under its ex-Carrefour chief executive, strategic priorities currently include a focus on last-mile delivery for its ecommerce offering; developing and rolling-out its own exclusive brands (OEB); reducing costs; and testing and launching new compact stores and partnership models. 

It is also testing store-in-store B&Q concessions within ASDA supermarkets, as well as Speedy Hire (LSE:SDY) (tool hire) concessions within B&Q stores. It is accelerating its Screwfix expansion in the UK & Ireland and will open its first Screwfix stores in France in 2022. International expansion plans are being considered via an online first approach.

For investors, sales comparatives are becoming increasingly tougher, with third-quarter like-for-like sales down 0.6% year-over-year to mid-September. Vaccinations and increased travel opportunities could also see DIY spending sacrificed in favour of holiday plans for a period. And broader product supply challenges and rising raw material costs are worth remembering.   

That said, the sea change in ecommerce sales – up 216% over the last two years - cannot be overlooked. Brand and geographical diversity are also strengths, while the pending need for greener homes should provide longer-term opportunity. But with the shares trading at an estimated 1.1 times price-to-net asset value compared to a three-year average of 0.9 times, and the share price sitting close to analyst's estimated fair value of 369p per share, much is already in the price. 

Positives: 

  • Diversity of geographical locations and brand names
  • Resilient housing market

Negatives:

  • Expects H2 like-for-like sales down between 7% and 3%
  • Management mindful of continued Covid uncertainty

The average rating of stock market analysts:

Hold

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