Kingfisher profits plunge as Screwfix and B&Q owner struggles under stagnant demand and economic uncertainty
- Kingfisher revealed that retail profits fell 27.7% year-on-year to £555m
- Online revenues fell due to the absence of commercial restrictions in stores
- Earnings in the UK and Ireland were further affected by higher utility prices.
Kingfisher has seen its half-year profit fall as the Covid-induced boom in DIY products fades and the cost-of-living crisis hits consumer spending.
Retail profits for the owner of B&Q and Screwfix slumped 27.7% year-on-year to £555m for the first six months ending July 31, though they were still more than £100m above levels. prior to the pandemic.
The company mainly blamed a strong comparative performance in the British Isles over the previous year for the profit decline, although worsening economic uncertainty has also hit the home improvement sector.
Slowdown: Screwfix owner Kingfisher revealed that retail profit fell 27.7 per cent year-on-year to £555m for the first six months ending July 31
Earnings in the UK and Ireland were further affected by costs associated with opening 88 new stores, rising electricity and gas prices, and stronger demand for low-margin products.
Overall, reported comparable sales only fell 4.1 per cent to £6.81bn, which was in line with analyst expectations, despite online revenue slipping due to the absence of restrictions. commercials in stores.
Kingfisher saw strong growth in Poland, where its Castorama outlets were unaffected by forced closures, while Britain’s July heatwave boosted orders for B&Q refrigeration products.
Even though commerce has weakened, the company’s revenue was 16.6% higher in three years thanks to growth in all markets and e-commerce revenue that soared 156.3%.
The London-based group said sales since early August have been “encouraging”, boosted by growing interest in outdoor and “high-priced” items.
He added that inflationary pressures have eased due to the fall in the price of metals and plastics, while ocean freight rates have been reduced since January.
However, Kingfisher warned that cost tensions will continue in the second half of the year due to a time lag between ordering products and selling them.
Chief Executive Thierry Garnier said: “We continue to monitor the more uncertain economic outlook for the second half. We are therefore focused on delivering value to our clients at a time when they need it most.”
This slowdown marks a drastic change from the first half of the pandemic era, when the rise of working from home encouraged people with extra savings across Europe to fix up their properties.
Kingfisher became one of the biggest winners from the retail sector pandemic, along with the likes of home improvement company Wickes and Travis Perkins, who both recently reported weakening demand in their half-year results.
Adam Vettese, an analyst at trading platform eToro, said: “If Kingfisher’s results are anything to go by, the pandemic-driven DIY boom is over.
“While CEO Thierry Garnier talks about ‘resilient’ performance, the reality is that most investors will focus on the fact that many of his key metrics are considerably lower than this time last year.”
He added: “The problem for all retailers, including Kingfisher, is that they are not only affected by the higher cost of products, but also their customers, which means they are likely to spend less until the economic situation improves.” .
Kingfisher shares were down 3.5% at 238.6 pence as of mid-morning on Tuesday, meaning their value has fallen by around a third in the last 12 months.