Interactive Investor

ii view: Kingfisher shares take off during DIY boom

12th January 2021 16:21

Keith Bowman from interactive investor

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Kingfisher shares have had their best year in a long time, driven by new strategic goals and a push to online sales.

Fourth-quarter trading update to 9 January

  • Same store or like-for-like sales up 16.9%

Chief executive Thierry Garnier said:

"While the strength of our Q4 trading, to date, is reassuring, uncertainty over Covid-19 and the impact of lockdown restrictions in most of our markets continue to limit our visibility. Longer term, we are confident that the strategic and operational actions we are taking are building a strong foundation for sustainable long-term growth. We also believe that the renewed focus on homes is supportive for our markets.”

ii round-up:

DIY retailer Kingfisher (LSE:KGF) today announced another double-digit increase in same-stores sales and pushed higher full-year profit expectations, as sales remained buoyant under stay-at-home pandemic restrictions. 

Fourth-quarter sales rose by 16.9%, aided by a firm pickup in French sales following a November lockdown and ongoing strong e-commerce demand. As such, management is now more comfortable with the upper end of current year analyst adjusted profit forecasts of between £667 million and £742 million. 

Kingfisher shares rose by more than 2% in UK trading, leaving them up just over a third for the last year. They've doubled since late March pandemic lows. Shares for Toolstation and Wickes owner Travis Perkins (LSE:TPK) remain down around a tenth over the last year, although they are up over 70% since late March. 

Kingfisher brands include B&Q, Castorama, and Brico Dépôt and Screwfix. French like-for-like sales improved from down 0.1% in November, amid lockdown restrictions, to up 29.4% in December.

Sales for the group’s UK trade focused Screwfix brand accelerated in December, leaving them on track to reach £2 billion for the full year. 

Same-store sales for the current financial year-to-date are up 6.5%, including the 17.4% gain reported in the prior third quarter. 

Full-year results are scheduled for 22 March.

ii view:

Kingfisher is a multiformat 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 are spread across Poland, Romania and Iberia. The sale of its Russian stores completed in late September. 

Fresh strategic goals under relatively new chief executive and 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. 

For investors, e-commerce comparatives will become increasingly tougher going forward, while a vaccine and any return to more normal times could see DIY spending sacrificed in favour of holiday plans. But Kingfisher has proved something of a pandemic winner. All its stores remain open given their status as essential, and a current 2021 estimated forward price/earnings (PE) ratio of under 15 compares well to a general retail sector average of around 21, suggesting room for further possible upside. In all, and while some caution given a still Covid clouded outlook appears sensible, investors have arguably had plenty to cheer following the change of chief executive back in late September 2019. 

Positives: 

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

Negatives:

  • Covid-19 creating limited sales visibility
  • No half year dividend payment

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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