Interactive Investor

ii view: Kingfisher doubles internet sales

23rd November 2020 15:46

Keith Bowman from interactive investor

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Online sales have received a pandemic push, but are the shares now up with events?

Third-quarter trading update to 31 October

  • Currency adjusted total group sales up 17.6% to £3.5 billion
  • e-commerce sales up 153% year-over-year
  • Total liquidity of over £3.5 billion

Chief executive Thierry Garnier said:

"We achieved strong sales growth in Q3 across all retail banners and categories, with higher footfall and average transaction value. Our growth was supported by strong market demand, as consumers spent more time in their homes and focused on improving them.

"At the same time, we have made good progress against our 'Powered by Kingfisher' strategic priorities - the early benefits of which are enabling us to meet the current strong demand, both in-store and online, and grow our share in key markets. 

"Overall, we believe that the renewed focus on homes is supportive for our markets. Furthermore, we are confident that the strategic and operational actions we have taken so far are helping us to build a strong foundation for long-term growth."

ii round-up:

Kingfisher (LSE:KGF) is a multi-format home improvement retailer which employs over 75,000 people across nearly 1,400 outlets. 

It has nearly 1,000 stores in the UK & Ireland, over 200 in France, and the rest spread across Poland, Romania and Iberia. The sale of its Russian stores completed in late September. 

The company's general DIY brands include B&Q, Castorama, and Brico Dépôt, while brands focused on trade include both Screwfix and TradePoint. 

For a round-up of this latest trading update, please click here

ii view:

Fresh strategic goals under a relatively new chief executive, a veteran of French retailer Carrefour, include growing e-commerce sales, moving to a balanced, simpler local operating model and building a mobile-first, service-orientated customer experience. Given a push from the pandemic, e-commerce sales generated 17% of the overall total in this latest quarter, a doubling from the 8% achieved this time last year. Of those e-commerce sales, click and collect now accounts for 77%, up from 61% this time in 2019.  

The work from home bias under the pandemic has also seen more consumers changing spare rooms to offices. And travel restrictions have left holiday plans abandoned and monies redirected to DIY projects. However, a vaccine and a return to more normal times could see DIY spending sacrificed in favour of holiday plans for a period, reversing the current trend.

For investors, life under the pandemic is for now working in the company’s favour. All its stores remain open. A current estimated forward price/earnings (PE) ratio below both the three and 10-year averages offers potential for share price upside. But the suspension of the dividend payment has removed a former core attraction. E-commerce comparatives will also become increasingly tougher going forward and the full hurdle of Brexit has yet to be overcome. In all, and with the share price having almost doubled since March, room for some investor caution remains. 

Positives: 

  • Diversity of geographical locations and brand names
  • A new strategic plan including growing online sales

Negatives:

  • Covid-19 creating limited sales visibility
  • Dividend payment suspended

The average rating of stock market analysts:

Hold

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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