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Kingfisher Posts Group Sales Decline; Lowers Guidance

B&Q Merton SC 725 x 500

Kingfisher plc is today providing its Q3 23/24 sales. 

For France and Other International performance, click here.

Key points

  • Q3 sales of £3.2bn; total sales -2.1% (reported) and -2.7% (constant currency)

  • LFL -3.9% including a -0.4% calendar impact(1) with overall volumes continuing to show an improving trend

  • Underlying retail and trade consumer trends resilient in the UK and improving in Poland, in line with our expectations; market trends in France weaker than expected

  • Q3 by region:
    • UK & Ireland: market share gains at B&Q (including TradePoint) and Screwfix with resilient underlying sales trends

    • France: Castorama performing in line with the market; underperformance at Brico Dépôt due to significantly higher weighting of building materials (including insulation) and electricals, plumbing, heating & cooling (EPHC) products (which have seen a delayed start due to the warmer weather, against strong prior year comparatives)

    • Poland: improvement in sales trend since H1; market share remains up significantly on a two-year basis

  • Opened four Screwfix stores in France in Q3 (13 in total); Screwfix online launched in six new European markets

  • Total e-commerce sales growth of +7.4%, supported by continued strong growth of B&Q’s marketplace (reaching 35% of B&Q’s e-commerce sales(2) in October)

  • Full year adjusted PBT guidance lowered to c.£560m(3) to reflect continuation of Q3 trends in Q4, including continued resilience in the UK and market weakness in France; now expect full year free cash flow of c.£470m

  • Launched first tranche of new £300m share buyback programme, with c.£26m completed to date 

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Total sales +3.3% (LFL +1.1%), reflecting resilient consumer demand. Both banners grew faster than their respective markets (as measured by the British Retail Consortium, Barclays and GfK), with particularly strong market share gains seen at Screwfix. 

  • B&Q sales +1.0%. LFL +1.1%, with resilient retail trends outpaced by trade sales. The business saw good performances in surfaces & décor, tools & hardware and outdoor categories in the quarter, offsetting a slower start to autumn and winter product sales. B&Q’s total e-commerce sales increased by 31.8% YoY, with an overall e-commerce sales penetration of 12.9% (Q3 22/23: 10.1%), driven by the further scaling of B&Q’s e-commerce marketplace, which reached a participation of 35% in October (i.e., B&Q’s marketplace gross sales divided by B&Q’s total e-commerce sales). Marketplace gross merchandise value (GMV)(8) increased by over 290% YoY. B&Q opened one new store in Q3 (a B&Q Local compact format in Sutton).TradePoint, B&Q’s trade-focused banner, outpaced retail sales in the quarter with LFL sales of +3.1%, reaching a penetration of 23% of B&Q’s total sales (Q3 22/23: 23%). The banner continues to successfully strengthen its product and services proposition for trade customers, including trade-only deals and events. Customer engagement and loyalty also continues to strengthen, with membership sign-ups growing YoY.

  • Screwfix sales +6.8%. LFL +0.9%, with robust demand from trade customers and good YoY growth in the tools & hardware and building & joinery categories. The unseasonably warm weather in the UK in September and October impacted sales of plumbing and heating products. Screwfix opened 11 net new stores in the UK & Ireland in the quarter, for a total of 23 net new stores opened in the nine months to 31 October. Note that total sales for Screwfix UK & Ireland include sales arising from the acquisition on 20 March 2023 of the assets of Connect Distribution Services (renamed Screwfix Spares). Since acquisition, Screwfix Spares has performed in line with expectations, contributing c.2% to total Screwfix sales growth in Q3. The results of Screwfix France are recorded within the ‘Other International’ division.

Current trading and outlook

Q4 has started largely in line with the trends of Q3, including continued resilience in the UK and market weakness in France (with Brico Dépôt closing the gap in performance to Castorama). For the three weeks to 18 November 2023(7), Group LFL sales were -3.4%.

We continue to take decisive cost actions in France, more than offsetting the impact of inflation. However, given continued market weakness, this is not sufficient to offset the impact of lower sales in this region. Reflecting our expectation for this trend to continue in France for the balance of the year, we now expect FY 23/24 Group adjusted pre-tax profit (PBT) to be c.£560m (previous guidance c.£590m).

Our revised sales expectation flows through to cash, and so we now expect to deliver c.£470m of free cash flow for the year (previous guidance >£500m). This free cash flow is supported by ongoing sales and profit resilience in the UK as well as the unwind of working capital flows in the prior year. We continue to expect a positive contribution from inventory unwind, together with disciplined capital allocation, which underpin our expectation of free cash flow delivery. We also reaffirm our commitment to our recently commenced £300m share buyback programme.

Thierry Garnier, Chief Executive Officer, said: 

“Our UK banners performed well in Q3, with B&Q, TradePoint and Screwfix growing sales and market share. In France, our performance was impacted by a weak retail market, as well as a delayed start to insulation, plumbing and heating sales – to which Brico Dépôt is more heavily weighted – due to unusually warm autumn weather, and strong prior year comparatives in these categories. In Poland we are seeing early signs of recovery in the trading trend, against an incrementally more positive consumer and economic backdrop. Reflecting the weakness of the French market, and notwithstanding our proactive cost actions, we have lowered our Group profit guidance for the full year. 

“We continue to focus on our execution and driving our strategy forward. Our online marketplaces are growing rapidly, with B&Q’s marketplace reaching 35% of its e-commerce sales in October. Screwfix has continued its international expansion, by launching as a pure-play online retailer in six new European countries, and opening four new stores in France in the quarter. We also continue to harness AI and data to support sales, profit and cash, including by growing our retail media proposition across the Group. 

“As we move into 2024, we are focused on what is in our control. First, a continued focus on growing market share in the UK, France and Poland with delivery of our strategic growth initiatives. Second, driving productivity gains to offset wage inflation. And finally, delivering on our free cash flow and shareholder returns targets. We expect to see some product cost price inflation, albeit at a significantly lower level, and expect rational retail pricing and competitive price indices at all our banners. 

“On the medium-to-longer term outlook, we remain very positive for home improvement growth in our markets, and our ability to grow ahead of our markets.”

Source : Kingfisher PLC

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22 November 2023

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