FTSE 100-listed Kingfisher has reported a significant decline in profits as consumer spending remains constrained. The home improvement retailer recorded a drop in revenues of 0.6% to £13 billion, with sales down 3.1% on a like-for-like basis. Retail margins also shrunk from 7.1% to 5.8%, resulting in a 22.3% year-on-year decrease in pre-tax profit to £475 million. Adjusted profits were down 25.1% at £568 million. Despite these challenges, net debt decreased by £158 million to £2.1 billion, thanks to a net increase in cash. The full-year dividend remained unchanged at 12.4p per share.
In terms of sales performance, Kingfisher saw a reversal in sales growth, with like-for-like sales increasing by 0.8% in its primary market. The company attributed this positive performance to resilient e-commerce and trade customer sales, as well as market share gains across all divisions. However, reported sales in the UK and Ireland dropped by 8% to £555 million, while turnover in France declined by 28.8% to £139 million. Kingfisher cited weak consumer confidence in the French market, with Castorama performing in line and Brico Dépôt underperforming. Other international markets also experienced a significant decline in sales, driven by poor trading in Poland.
CEO Thierry Garnier expressed confidence in the growth prospects of the home improvement industry and the company’s ability to outperform its markets in the long term. However, he cautioned about the short-term market outlook for 2024 due to challenges in housing demand. Sales continued to decline at the start of the year, with a 2.4% decrease in like-for-like turnover in the April quarter. Kingfisher noted an improved sales trend in the UK and Ireland, France, and Poland compared to the previous financial period. The company expects adjusted pre-tax profit to fall between £490 million and £550 million in the current fiscal year.
Analyst Mark Crouch from eToro described Kingfisher’s latest update as concerning, highlighting the need for interest rate cuts to stimulate growth. He pointed out that the company, similar to the housing market, is struggling to generate growth and is facing pressure on margins. While positive cashflow and an attractive dividend may be reassuring to investors, the continuous decline in profits could jeopardize future returns. Kingfisher remains focused on its long-term strategy and customer experience despite the challenging market conditions, with a cautious outlook for 2024.
