ii view: internet boosts Kingfisher profit growth

Third-quarter trading update to 31 October

• Total revenue up 1% to £3.25 billion
• Like-for-Like or same store sales up 0.9% 

Guidance:

• Now expects to achieve full-year adjusted pre-tax profit of between £540 million and £570 million, up from a previous £480 million to £540 million

Chief executive Thierry Garnier said:

"We delivered another quarter of high quality, volume-led growth, driven by our Group strategic initiatives in e-commerce and trade and by our performance in core and 'big-ticket' categories. 

"As we look ahead, we are committed to driving shareholder returns through the consistent execution of our strategic priorities and by being disciplined on margin and costs."

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ii round-up:

Kingfisher (LSE:KGF) is an international DIY retailer operating across seven European countries including the UK, Ireland, France, and Poland.

The retailer operates over 1,800 stores and including a 50:50 joint venture in Turkey. Kingfisher brands include B&Q, Castorama, Brico Dépôt, Screwfix, TradePoint and Koçtaş in Turkey.

Kingfisher brands range from B&Q, Castorama, Brico Dépôt, Screwfix to TradePoint and Koçtaş in Turkey.

For a round-up of these latest results announced on 25 November, please click here.

ii view:

Opening the first UK B&Q store in 1969, the group today employs around 73,000 people. Geographically, the UK and Ireland generated most sales during its last financial year at 50%. That was followed by France at 30%, Poland 14%, and other countries the balance of 6%. The FTSE 100 company competes against rivals including Howden Joinery Group (LSE:HWDN), Wickes Group (LSE:WIX), Topps Tiles (LSE:TPT) and Dunelm Group (LSE:DNLM).

Management categorises product sales into three - ‘Repair, Maintenance and Renovation’ with core sales accounting for 70% of revenues during this latest quarter. Next came 'Big-Ticket' sales - items such as kitchens - at 16%, with ‘Seasonal’ sales encompassing products such as garden furniture the balance of 14%. Group strategic focus include developing its trade business, speeding-up online sales, rolling out compact store formats, and making Kingfisher more lean and agile.  

For investors, like-for-like French and Polish sales fell 2.5% and 1.3% respectively during this latest period. Increased taxes in both the UK and France have added to costs. A forecast price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap, while big ticket and seasonal sales offer exposure to cyclical housing markets and unpredictable weather. 

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More favourably, like-for-like sales in its core UK and Ireland market rose 3%, including a 19% increase in B&Q online sales. Group e-commerce sales are up 10.2%. Initiatives including a focus on own-exclusive brand sales now see such products accounting for 43.7% of overall sales. An ongoing pursuit of cost savings saw a reduction of £120 million over its last financial year to late January.

In all, slow housing markets and elevated economic uncertainty for markets such as France generate caution. That said, management initiatives and a forecast dividend yield of around 4% mean investors are likely to remain interested in this major European DIY retailer.

Positives: 

• Diversity of geographical locations and brand names
• 2024 growth in market share for all key regions

Negatives:

• Uncertain economic outlook
• The weather can impact performance

The average rating of stock market analysts:

Hold