ii view: Kingfisher to shrink average store size

Sales comparisons are set to become tougher but the dividend has been restarted. We assess prospects. 

Full-year results to 31 January

• Revenue up 7% to £12.3 billion
• Reported pre-tax profit up 634% to £756 million
• Adjusted pre-tax profit up 44% to £786 million
• Both a delayed interim and final dividend totalling 8.25p per share to be paid

Chief executive Thierry Garnier said:

"The dedication and commitment of our 80,000 colleagues has enabled us to make substantial strategic, operational and financial progress this year. Kingfisher is coming out of the Covid crisis as a stronger business, with an improved competitive position in all key markets, strong new customer growth and a step change in digital adoption. I would like to express my personal thanks to all our teams for their incredible efforts in the most testing of circumstances.

"Current trading remains positive and, while visibility is limited for the year as a whole, we are confident of continued outperformance of our wider markets. The COVID crisis has established new longer-term trends that are clearly supportive for our industry - including more working from home, the renewed importance of the home as a 'hub', and the development of a new generation of DIY'ers - and we expect these to endure. With our strategic progress, we are well positioned to capitalise on these new and positive market trends."

ii round-up:

Kingfisher (LSE:KGF) is a multiformat home improvement retailer with nearly 1,400 outlets. 

It has over 1,000 stores in the UK & Ireland, over 200 in France, a little over 80 in Poland and around 30 in each of Romania and Iberia. The sale of its Russian stores completed late September. 

For a round-up of these latest results, please click here.

ii view:

Kingfisher brands include both B&Q and Screwfix in the UK, and Castorama and Brico Dépôt in France. Under its former chief executive, fresh strategic goals now include growing e-commerce sales, moving to a local operating model and testing compact store concepts and adapting its store footprint. 

Most of its current UK and Ireland stores, around 700, are compact Screwfix outlets. Over the next few years, it plans to increase its overall store count, while at the same time reducing the average size of its stores. A medium-term roadmap to over 900 Screwfix stores in both the UK and Republic of Ireland is now being targeted. It is also testing store-in-store B&Q concessions within ASDA supermarkets, as well as Speedy Hire (LSE:SDY) (tool hire) concessions within B&Q stores. International expansion plans are being considered via an online first approach. 

For investors, e-commerce comparatives will become increasingly tougher going forward. The vaccine rollout and any return to more normal times could also see DIY spending sacrificed in favour of holiday plans. That said, a return to dividend payments suggests confidence in the outlook, while an estimated forward 2021 price/earnings (PE) ratio in the region of 13 times is below the sector average at around 18 times. In all, and while a doubling in the share price over the last year offers some caution, online sales momentum gained from the pandemic might now prove to be just the shot in the arm the company’s transforming long term strategy required.  

Positives: 

• Diversity of geographical locations and brand names
• Return to dividend payments

Negatives:

• Outlook guidance looks for second-half like-for-like sales to fall between 15% to 5%
• Slower vaccine rollouts in its European markets

The average rating of stock market analysts:

Hold