ii view: Sales fall at Kingfisher

DIY retailer Kingfisher needs to act fast or it could go the way of Marks & Spencer.

Half-year results to 31 July 2019

• Revenue down 1.4% to £5.99 billion
• Like-for-like (LFL) sales down 1.8%
• Adjusted pre-tax profit down 6.4% to £353 million
• Dividend payment unchanged at 3.33p per share

Chief executive Véronique Laury said:

"Our transformation activity continued in the first half of this year, including new range launches across the Group and the rollout of further capabilities within our unified IT platform. These activities resulted in some ongoing disruption that impacted sales at B&Q and Castorama France. This was partly offset by positive sales performances in Screwfix, which continues to grow its market share, and Poland."

ii round-up:

DIY retailer Kingfisher (LSE:KGF) operators over 1,300 stores across 10 countries, although with the majority in the UK and France. It intends to exit Russia and Iberia going forward. 

Employing over 75,000 people, its brands include B&Q, Screwfix, Castorama, Brico Dépôt, Koçtaş in Turkey and its latest offering GoodHome. 

In 2018, the UK accounted for just over a half of group retail profit and France one third. 

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

ii view:

The reign of the departing chief executive has been 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. 

For the new boss, a veteran of French retailer Carrefour, many of the same objectives may well remain, with a recovery in profitability at the group's French Castorama and Brico Dépôt businesses potentially topping the agenda. 

For investors, patience may be wearing thin. A 46% fall in the share price over the last three years compared to a 16% fall for the FTSE-350 General Retailers sector tells its own story. A historic dividend yield of over 5% and covered twice by earnings offers some compensation, but the new CEO will need to act fast or Kingfisher may find itself going the way of Marks & Spencer (LSE:MKS) - out of the FTSE 100 index. 

Positives: 

• Gross profit margin up 0.6% to 37%
• Digital sales up 18%, accounting for 7% of total sales, up from 3% in FY 2015/16
• New chief executive may galvanise the company and provide renewed clarity of purpose

Negatives:

• LFL sales fell 1.8%, worse than the fall of 1.6% over the last financial year
• Retail profit in France fell by 12.7%
• Outlook comments highlight uncertainty around UK consumer demand

The average rating of stock market analysts:

Sell