- Kingfisher reported retail profits dropped by 27.7% year-on-year to £555m
- Online revenues fell back due to the lack of store trading restrictions
- Profits in the UK and Ireland were further squeezed by surging utility prices
Kingfisher has seen half-year profits fall as the Covid-induced gain in DIY products weakens and the cost of living crunch hurts consumer spending. The Screwfix and B&Q owner’s retail profits slumped by 27.7% year-on-year to £555million for the first six months ending 31 July, even though this was still more than £100million above pre-pandemic levels.
A strong comparative performance in the British Isles during the previous year was essentially blamed by the company for the fall in profits, though deepening economic turmoil has also affected the home improvement sector.
Earnings in Ireland and the UK were further squeezed by costs associated with setting up 88 new stores, surging gas and electricity prices, and stronger demand for low-margin products. Overall, recorded like-for-like sales still only dropped by 4.1% to £6.81 billion, which was in line with analysts’ projections, although online revenues fell back due to the lack of store trading restrictions.
Kingfisher saw significant growth in Poland, where its Castorama outlets were not affected by mandatory closures, while Britain’s heatwave in July caused a rise in orders for B&Q’s cooling products. Even as trade waned, the company’s turnover was 16.6% higher on a three-year basis owing to growth in all territories and e-commerce revenues shot up 156.3%.
The London-based group said sales volumes since the start of August had been ‘encouraging’, boosted by growing interest in ‘big-ticket’ and outdoor items. It added that inflationary pressures have reduced as the price of plastics and metals had dropped, while sea freight rates have been tumbling downwards since January.
However, Kingfisher warned that cost strains are expected to continue throughout the second half of 2022 because of a time lag between ordering products and selling them.
Chief executive Thierry Garnier said:
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“We remain vigilant against the more uncertain economic outlook for the second half. We are therefore focused on delivering value to our customers at a time when they need it most.”
Kingfisher Enjoyed Gains During The Pandemic
This year’s downturn in the DIY market marks a substantial departure from the first half of the pandemic era when the surge in remote working and restrictions on out-of-home activities inspired people with extra savings across Europe to spiff up their properties.
Kingfisher became one of the retail sector’s main pandemic winners, as well as the likes of fellow home improvement firms Travis Perkins and Wickes, both of who currently announced a dampening in demand in their half-year results.
Adam Vettese, an analyst at investment platform eToro, said:
“If Kingfisher’s results are anything to go by, the pandemic-fuelled DIY boom is well and truly over. While CEO Thierry Garnier talks about ‘resilient’ performance, the reality is that most investors will be focused on the fact that many of its key metrics are considerably lower than they were this time last year.”
“The trouble for all retailers, including Kingfisher, is that they are not only getting clobbered by the higher cost of goods but so too are their customers, meaning they are likely to spend less until the economic situation improves.”
Shares of Kingfisher closed 3.9% lower at 237.6p on Tuesday, meaning they have lost around a third of their value in the past 12 months.