Kingfisher makeover fails to impress

The Kingfisher makeover has yet to win over investors, with results today from the B&Q owner showing why.

There are signs of progress within the Kingfisher (LSE:KGF) transformation plan, but the retail environment remains fiercely competitive and will continue to move on as the company tries to put its own house in order. Unfortunately, any benefits arising from the five-year overhaul are being negated by the weak performance of the underlying business.

In particular, the Castorama division in France has long been a thorn in Kingfisher's side, and the company is planning some restorative measures to the unit although it remains to be seen whether a robust improvement can be made.

Meanwhile, the B&Q unit is also struggling and the planned departure of chief executive Véronique Laury will add further uncertainty. In terms of performance, pre-tax profit has tumbled by 53%, with the underlying earnings per share being reduced by 6% and like-for-like sales also moving south.

One exception to Kingfisher’s recent malaise has been the performance of its Screwfix division, which not only continues to contribute strongly, but has also now been earmarked for further expansion in an effort to capitalise on the brand’s clear popularity.

Source: TradingView (*) Past performance is not a guide to future performance

Within the numbers, there was a small uptick in sales, a reasonably healthy gross margin of 36.9% has been maintained and whilst some of the key metrics make for ugly reading, they are slightly above expectations in general.

Meanwhile, the share buyback programme has given some support and the dividend yield of 4.4%, whilst healthy enough, is partly a factor of the share price decline and will therefore be of scant solace to investors.

Although the shares have bounced off recent lows, clocking up a gain of 14% over the last three months, the price has nonetheless declined 27% over the last year, during which time the wider FTSE 100 has posted a rise of 3.7%.

With more questions than answers remaining on the transformation plan, investors' patience seems to have evaporated, with the market consensus of the shares now coming in at a sell.

*Horizontal lines on charts represent levels of previous technical support and resistance. Trendlines are marked in red.