Interactive Investor

ii view: Kingfisher online sales soar

22nd July 2020 11:20

Keith Bowman from interactive investor

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Stay-at-home Covid-19 guidance has created a boom for this DIY retailer.

Second-quarter trading to 18 July

  • Like-for-like (LFL) sales up 21.6%
  • Ecommerce sales up 202% in May and 225% in June
  • Year to date LFL sales are down 3.7%

Guidance:

  • Expects first half adjusted pre-tax profit to be ahead of last year
  • No guidance given for current year due to Covid-19 uncertainty  

ii round-up:

DIY retailer Kingfisher (LSE:KGF) now expects to report first-half adjusted profit ahead of last year, driven by strong demand for products as customers stay and work from home under coronavirus guidance. 

Same store, or like-for-like sales in the second quarter so far are up 21.6%. Online sales in June soared, rising by 225%.

Kingfisher shares rose by more than 10% in early UK trading and have doubled since pandemic induced March lows. Shares for Wickes-owner Travis Perkins (LSE:TPK) are up by nearly 50% since March. 

Kingfisher, which owns brands such as B&Q, Castorama and Screwfix, closed stores from late March under Coronavirus lockdowns. Like-for-like sales year-to-date are down 3.7% given the impact of closures in the first-quarter. 

First-half underlying pre-tax profit last year came in at £353 million, down 6.4% on 2018. Adjusted pre-tax profit for the full year fell by 5.2%.

Under measures to combat Covid-19, Kingfisher has been bearing down hard on costs and previously cancelled its final 2019 dividend payment in its efforts to help preserve cash. 

Given existing pandemic outlook uncertainty, the retailer continues to offer no current full-year financial estimates.  

It has nearly 1,000 stores in the UK & Ireland, over 200 in France, 80 in Poland and the rest spread across Romania, Iberia and Russia.

Half-year results are scheduled for 22 September 2020.

ii view:

The new chief executive, who joined in September 2019, and is a veteran of French retailer Carrefour, believes that the group had become overly complex and had lost its customer focus. Now, while prioritising the Covid-19 crisis, a new series of strategic goals have been established. These include growing e-commerce sales, moving to a balanced, simpler local-group operating model and building a mobile-first, service orientated customer experience. 

For investors, a previously muddled transformation has now been joined by measures to tackle the corona crisis. The scrapping of the 2019 final dividend to conserve £157 million in cash was unlikely to have been in previous thinking for the new CEO – removing a key shareholder attraction. 

But Covid-19 may have assisted group strategy, forcing it to further implement and stress test online and click & collect sales. Early signs are highly favourable. However, with the share price already doubling since mid-March to a 14-month high, and the support of a dividend currently missing, new investors will perhaps want further evidence that this rebound is sustainable.

Positives: 

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

Negatives:

  • Statutory Pre-tax profit has fallen for the last 3 years
  • Final dividend payment cancelled

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.

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