Sales have slumped, but stores are reopening and shares in the B&Q owner are at a seven-week high.
First-quarter trading update to 30 April 2020
- Sales down 24.8% to £2.15 billion
- Total UK and Ireland sales down 14.7%
- Total French sales down 41.5%
- Over £2 billion in total liquidity
Chief executive Thierry Garnier said:
"Having initially closed our stores in France and the UK, we have rapidly adapted how we operate to meet the essential needs of our customers safely during lockdown. We started by transforming our operations to meet a material increase in online transactions through our click & collect and home delivery services. We reconfigured our retail space and processes, allowing a phased and safe reopening of stores whilst preserving the social distancing and other health & safety protocols that are likely to be with us for some time.
“Overall, the operational and financial actions we have taken give us a sound footing in the current crisis and beyond.”
DIY retailer Kingfisher (LSE:KGF) reported a drop in sales of nearly 25% in this latest trading update, hit by the closure of its stores under the corona crisis.
UK and Irish sales under its B&Q brand fell by almost 15% in the three months to the end of April. French sales via its Castorama stores dropped by 41.5%. The UK and Ireland accounted for just over two-fifths of 2019 sales, France just over a third.
But store reopenings since the middle of April have provided for improving sales trends at the beginning of May.
Kingfisher shares gained by more than 6% in early UK trading, although are down by 21% in the year-to-date. Shares of kitchen specialist and rival Howden Joinery (LSE:HWDN) have fallen by a similar amount, while Topps Tiles (LSE:TPT) shares have almost halved over 2020.
Kingfisher's e-commerce sales had grown risen strongly since mid-March as Covid-19 concerns really begun to grip consumers.
The company, which has over 1,350 stores across nine European countries, now has access to cash liquidity of over £2 billion, up from just over £1 billion back in March.
Under measures to combat Covid-19, management is bearing down hard on costs and previously cancelled its final 2019 dividend payment in its efforts to help preserve cash.
The reign of the previous chief executive was dominated by implementation and execution of a transformation plan, targeting goals including unifying the product range and computer systems, increasing operational efficiency and driving digital capability. The level of success achieved is questionable.
Taking charge in late September, the new CEO and a veteran of French retailer Carrefour (EURONEXT:CA), appeared to question the degree of change and an arguable loss of focus on the customer. Further changes of strategy looked likely, although have for now been overtaken by the corona crisis.
For investors, patience may be wearing thin. A less than 5% gain in the share price over 2019 compared to a 35% rise for the FTSE 350 General Retailers sector tells its own story. The once attractive and supportive dividend has now evaporated under measures to tackle Covid-19. That said, the still relatively new CEO is likely to be given more time, underlined by a 21% fall in the share price year-to-date and broadly in line with a 24% fall for the wider retail sector.
- Diversity of geographical locations and brand names
- New CEO may galvanise the company and provide renewed clarity of purpose
- Over 700 outlets remain closed due to Covid-19
- Final dividend payment cancelled
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