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Kingfisher suffers as B&Q takes seasonal hit

B&Q Meir Park

Earlier today Kingfisher reported on their Q2 trading performance, covering the 3 month period to 31st July 2017.

The business recorded a 1.9% decline in total group sales to £3.14bn, due to the on-going weakness of the French market, disruption caused by its restructuring plans and lower seasonal sales at B&Q, where poorer weather impacted their performance.

Sales declined in B&Q, Castorama, Brico Depot and at its businesses in both Spain and Russia. However, Screwfix continued to be the shining light reporting a 17.2% increase in sales, 10.8% on a like for like basis, driven by its leading digital capability, new and extended specialist ranges and new stores. 

Kingfisher also reported that disruption caused by its ‘One Kingfisher’ plan, including merging product ranges, supply chain functions and IT systems had once again impacted their performance.

Download the Kingfisher Q2 press release here

Performance Summary by division

  • B&Q seasonal performance down 11% given weather boosted Q2 last year (+10%) and Q1 this year (+17%) (H1 2017/18: -1%)
  • continued weaker sales in France; and
  • continued business disruption from our ONE Kingfisher plan albeit with an overall improving trend
  • Remain comfortable with Year 2 consensus underlying EPS expectations: self-help cost initiatives already in place including c.£5m more of GNFR benefits than previously guided (now c.£25m)
  • Remain on track to deliver Year 2 strategic milestones
  • Entered into binding acquisition agreement in August to significantly strengthen our position in Romania, subject to regulatory approval
  • Returned a further £168m (53m shares) year to date via share buyback of previously announced c.£600m capital return

 

 

Sales

2017/18

% Total

Change

% Total

Change

% LFL

Change

 

£m

Reported

Constant currency

Constant currency

UK & Ireland

1,332

(2.0)%

(2.1)%

(1.0)%

- B&Q UK & Ireland

967

(7.7)%

(7.8)%

(4.7)%

- Screwfix

365

+17.2%

+17.2%

+10.8%

France

1,188

+5.2%

(3.3)%

(3.8)%

- Castorama

668

+6.3%

(2.3)%

(2.8)%

- Brico Dépôt

520

+3.8%

(4.5)%

(5.1)%

Other International

628

+16.6%

+2.3%

-

- Poland

381

+19.7%

+5.7%

+4.0%

- Russia

110

+17.4%

(5.0)%

(10.1)%

- Spain

92

+1.7%

(6.5)%

(4.8)%

- New Country Development(2)

 

45

n/a

n/a

n/a

Total Group

3,148

+4.0%

(1.7)%

(1.9)%

 

Véronique Laury, Chief Executive Officer, said:

“Q2 has broadly followed a similar course to Q1 although B&Q's performance was impacted by seasonal swings across Q1 and Q2. We have also continued to experience some disruption across the businesses, although on an improving trend. Availability of this year’s unified and unique product is now approaching normal levels. We continue to adapt new processes as our transformation progresses, which will support the significant amount of change planned for H2.  

"Having been very aware that this year would be challenging given the step up in transformation activity, we already have self-help plans in place to support our overall Year 2 performance, though we remain cautious on the H2 outlook for the UK and France as previously guided. We remain on track to deliver our Year 2 strategic milestones, and look forward to updating you on our wider progress in more detail at our H1 results."

Analysis & Commentary

Fiona Cincotta, a senior market analyst at https://www.cityindex.co.uk/ shared her views with Insight DIY. 'A recovery in the French business that many were hoping for hasn't materialized. Like-for-like revenue there is continuing to slide at a concerning rate, with the 3.8% constant currency fall this quarter only a slight improvement on the previous quarter's 5.5% decline'.

'Perhaps more disappointing, though, is the weaker performance in the U.K. Until now, the unit had been a solid performer, but revenue here has turned south, too, having grown at an impressive 3.5% rate in the previous quarter. Kingfisher has partly blamed the weather, but the fall will also be interpreted as a sign that home improvement stores are no longer immune to the political and economic uncertainty, fanned by Brexit, that's hurting the broader retail sector'.

'There could be some light at the end of the tunnel on the restructure front: management has noted that disruptions caused by the merger of its IT systems and product ranges is on an "improving trend". But with significant changes still planned for the second half, and macro economic headwinds possibly blowing stronger, investors looking for concrete signs that Kingfisher is a sturdier investment will have to be patient'.

Source: Insight DIY Team & Kingfisher Press Release

For all the latest news, intelligence and analysis on Kingfisher, B&Q and Screwfix, sign up for the Insight DIY newsletter today.

 

17 August 2017

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