Kingfisher, a FTSE 100-quoted home improvement retailer, announced a sharp fall in profits on Monday due to continued pressure on consumer spending. The company’s share price was down 2.3% at 228.3p per share at the start of the week. Revenues dropped 0.6% to £13 billion, with sales on a like-for-like basis decreasing by 3.1% year on year. Retail margins also shrank to 5.8% from 7.1%, leading to a 22.3% decline in pre-tax profit to £475 million.
Despite the challenges, Kingfisher managed to reduce its net debt by £158 million to £2.1 billion thanks to a net increase in cash. The company maintained its full-year dividend at 12.4p per share. Sales in its home market grew by 0.8% due to strong performance in e-commerce and trade customer sales, as well as market share gains across all divisions. However, reported sales in the UK and Ireland were down 8%, while turnover in France slumped by 28.8% due to weak consumer confidence.
Kingfisher’s other international markets also saw a significant decline in sales, with turnover in Poland dropping by 56%. Chief executive Thierry Garnier remained confident in the company’s long-term strategy despite macroeconomic challenges. However, he expressed caution about the overall market outlook for 2024 due to the lag between housing demand and home improvement demand. Sales continued to decline in the new year, with like-for-like turnover down 2.4% in the April quarter.
Analyst Mark Crouch from eToro described Kingfisher’s latest update as “concerning,” highlighting the company’s struggle to produce growth. He emphasized the importance of interest rate cuts for Kingfisher’s future performance, as continued sliding profits could put pressure on margins and jeopardize future returns. The company expects adjusted pre-tax profits to fall between £490 million and £550 million in the current fiscal period, indicating a challenging road ahead for Kingfisher.
