Kingfisher shares plummet after Screwfix owner warns of £45m budget hit to profits
- Kingfisher said the NI increase will cost employers around £31 million in profits next year
- The group has also lowered its profit outlook for the current financial year
Kingfisher Shares plummeted on Monday after the retailer warned of a potential £45 million profit hit if the recently unveiled Budget announcements go ahead.
The owner of Screwfix believes the upcoming increase in employers’ National Insurance contributions will cost around £31 million in profits for the 2025/26 fiscal year.
It predicts a further impact of £14 million if proposed changes to social taxes in France and the delay in abolishing the sales-based CVAE are ratified.
Kingfisher also cut its profit outlook for the current financial year as it suggested plans by the British and French governments had weakened consumer confidence last month.
The London-based company now expects adjusted pre-tax profits to be around £510 million to £540 million, while it previously expected it to be £550 million.
Following this announcement, shares fell 13.4 per cent to 255.3p in early afternoon, making them the biggest faller on the FTSE 100 Index by some distance.
Tax hikes: Kingfisher shares tumbled on Monday after the retailer warned of a potential £45m hit to profits if recently unveiled budget announcements go ahead
Kingfisher’s sales have leveled off over the past two years as higher interest rates have weighed on demand.
This followed a Covid-19-induced boom in trading, driven by a stamp duty holiday, the rise of working from home and a growing desire among Brits for larger properties.
In the three months ended October 31, Kingfisher’s turnover shrank 0.6 percent to £3.2 billion, partly due to lower revenues in France.
Sales at Brico Dépôt fell 3.3 percent to £464 million, while at Castorama they fell 4.9 percent to £503 million, due to subdued demand for ‘big-ticket’ items.
Trading has remained weak since early November, but Kingfisher noted that like-for-like sales were only 0.5 percent lower than a year earlier.
Thierry Garnier, CEO of Kingfisher, commented: ‘Looking to next year, recent political and macroeconomic developments have layered increasing uncertainty on the short-term outlook in our markets.
“And so we continue to focus our energy on what we can control: achieving further market share gains through our key strategic priorities, and effectively managing our retail prices, costs and cash.”
Many prominent UK retailers have warned that planned changes to NI rates, together with the higher National Living Wage, will not only impact profits but also lead to price rises and job losses.
According to an analysis by Morgan Stanley, supermarkets Sainsbury’s, Morrisons and Asda face a combined £1.3 billion in additional NI bills over the course of this parliament, while Tesco could pay a further £1 billion.
Russ Mould, investment director at AJ Bell, said Kingfisher “faces significant headwinds from several tax changes, and there is only so much of that that can be offset by finding new cost efficiencies.”
“Companies have focused on operational improvements in recent years, and it’s difficult to continue finding new ways to save money without cutting too far and hurting service levels.”
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