Kingfisher takes massive hit to profits from stagnating demand

Kingfisher has seen half-year profits plummet as the Covid-induced boom in DIY products subsides and the cost of living crisis hits consumer spending.

The retail profits of the owners of B&Q and Screwfix fell 27.7 percent year-on-year to £555 million for the first six months ended July 31, although this was still more than £100 million above pre-pandemic levels.

A solid comparative performance in the British Isles over the previous year was mainly attributed to the decline in earnings, although deteriorating economic uncertainty had also affected the home improvement sector.

Profits in the UK and Ireland were further hurt by costs related to the opening of 88 new stores, rising electricity and gas prices and increased demand for low margin products.

Total reported like-for-like sales still fell just 4.1 percent to £6.81 billion, which was in line with analysts’ expectations, although online revenues declined due to the lack of retail trade restrictions.

Kingfisher saw strong growth in Poland, where Castorama facilities were not affected by forced closures, while the heat wave in Britain in July boosted orders for B&Q’s refrigeration products.

Even as trade has weakened, the company’s revenue was up 16.6 percent on a three-year basis thanks to growth in all markets and e-commerce revenues skyrocketing 156.3 percent.

The London-based group said sales have been “encouraging” since early August, boosted by growing interest in outdoor and big-ticket items.

It added that inflationary pressures have eased as the price of metals and plastics has fallen, while ocean freight rates have fallen since January.

However, Kingfisher warned that cost pressures will continue into the second half of the year due to a time lag between ordering and selling products.

Chief executive Thierry Garnier said: “We remain vigilant against the more uncertain economic outlook for the second half. We are therefore focused on delivering value to our customers when they need it most.”

This slowdown marks a drastic departure from the first half of the pandemic era, when the rise of working from home encouraged people with extra savings across Europe to refurbish their properties.

Kingfisher became one of the biggest pandemic winners of the retail industry, along with fellow home improvement companies Wickes and Travis Perkins, both of whom recently reported weakening demand in their half-year results.

Adam Vettese, an analyst at investment platform eToro, said: “If Kingfisher’s results are any proof, the pandemic-fueled DIY boom is really over.

“While CEO Thierry Garnier talks about ‘resilient’ performance, the reality is that most investors will be focused on the fact that many of his key metrics are significantly lower than last year around this time.”

He added: ‘The problem for all retailers, including Kingfisher, is that they are not only beset by the higher cost of goods, but so are their customers, meaning they are likely to spend less until the economic situation improves. .’

Kingfisher Shares were 3.5 percent lower at 238.6p by mid-morning Tuesday, meaning their value is down about a third in the past 12 months.