Kingfisher profit up 70% on home improvement boom

DIY retailer Kingfisher has increased its interim dividend by almost 40 per cent and will buy back £300 million (€350 million) of its shares after profits surged, although its shares fell on Tuesday amid doubt about how long the pandemic-driven uplift could continue.

The group, which owns B&Q and Screwfix in Britain and Ireland, and also operates in France, Spain and eastern Europe, has been a winner from the coronavirus pandemic as repeated lockdowns and the shift to working from home prompted consumers to spend more on their homes and gardens.

Although that pattern is expected to shift with the reopening of the economy, Kingfisher on Tuesday said an expected decline in sales in the second half of its financial year would be smaller than feared.

It forecast full-year sales would decline by no more than 7 per cent compared with a previous scenario of a drop of between 5 per cent and 15 per cent. The group added that adjusted pre-tax profit for the year would be between £910 million and £950 million (€1.05 billion and €1.1 billion), against analysts’ forecasts of about £912 million (€1.06 billion).

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So far in the third quarter, sales have been down 0.6 per cent from the same period last year, but up 16 per cent on pre-pandemic levels.

“Our industry is benefiting from new trends that we believe will be supportive over the long term,” said chief executive Thierry Garnier, adding that increased interest from so-called generation rent was particularly notable.

“Our survey evidence shows more interest in starting DIY for the first time and [people aged 18 to 30] are telling us they are enjoying it and learning.”

The company said last month it would create 140 jobs in the Republic with the opening of 11 new Screwfix stores. The company has opened five outlets this year in Carlow, Athlone, Portlaoise and Letterkenny and on the Kylemore Road in Dublin, and a further six locations are planned.

He said the business would continue to face pressure in the second half of the year from increased transport costs and raw material inflation, particularly wood.

Pre-tax profit for the first half of the group’s financial year, which ran to July 31st, was £677 million (€789 million), up 70 per cent on the same period a year ago, when most of its stores were either required to close or chose to do so for a short period during the first wave of the pandemic.

Kingfisher said ecommerce sales were up 21 per cent in the first half and had more than tripled since the start of the pandemic to account for about a fifth of the total.

Its interim dividend was 3.8p a share, up from 2.75p last year and 3.33p the year before. But shares in the company, which have risen 30 per cent over the past year, were down almost 5 per cent in London.

Kate Calvert, retail analyst at Investec, said there was “an increasing feeling that this is as good as it gets”.

– Copyright The Financial Times Limited 2021