Kingfisher, the UK’s largest DIY retailer and owner of brands B&Q and Screwfix, has cut its profit forecast for the year, with tough trading and higher operating costs denting margins in the first half.
Kingfisher reduced its full year adjusted pre-tax profit from £634m to £590m, which it said largely reflected lower gross profits in Poland and France, and higher operating costs in the UK & Ireland and Poland largely due to higher pay rates and energy costs.
But despite the full-year profit downgrade, the DIY giant revealed that first half sales were “slightly ahead of expectations”. Total sales reduced 1.0% to £6.88bn for the 6 months to July 31, with like-for-like sales down 2.2%.
In the UK and Ireland, like-for-like sales grew 1.7% for the first half, with strong market share gains at Screwfix.
Meanwhile in France, like-for-like sales fell 3.8% with a resilient performance at Castorama and a weaker one at Brico Dépôt. Like-for-like sales in Poland dropped 10.9%, impacted by strong comparatives and a weaker than expected second quarter.
First half adjusted pre-tax profit fell 28.8% to £336m, with the UK & Ireland and France slightly ahead of expectations (the latter due to good cost control), more than offset by a lower-than-expected Poland performance. Statutory pre-tax profit plunged 33.1% to £317m.
Kingfisher’s CEO, Thierry Garnier, says: “Trading in the UK & Ireland continues to have positive momentum. However, to better reflect our performance in H1 and the trading environment in our markets, we have updated our profit guidance for this year and are proactively managing our operating costs accordingly.”
But despite this adjustment, Garnier says he remains “very positive” on the medium-to-long term outlook for home improvement growth in its markets, and confident in the company’s ability to grow market share.
“We continue to make strong progress against our strategic priorities,” he explains. “E-commerce sales were up 7% in H1, supported by the continued success of our online marketplaces. B&Q’s marketplace sales reached 33% of its e-commerce business in July.”
HOW IS KINGFISHER USING AI?
Garnier says Kingfisher has been leveraging its data science capabilities to develop AI-powered solutions such as a new markdown tool, which in early pilots at B&Q delivered a “very encouraging margin improvement on clearance products”.
This is in addition to Implementing AI-powered product recommendation and personalisation engines at B&Q and Screwfix, with early pilots generating up to 10% of e-commerce sales.
It has also developed an end-to-end supply chain visibility tool to support lower inventory levels and faster replenishment cycles. Live in France, Iberia and Romania, the retailer said it is already showing early success of reducing inventory levels without impacting product availability.
In addition, the business has been advancing its retail media plans through new partnerships to accelerate advertising income. Initially in France, it has signed new partnerships with CitrusAd for technology and Unlimitail, the new retail media joint venture between Carrefour and Publicis, for sales support.
Kingfisher opened four new Screwfix stores in France in the first half, taking the total to 9. It is planning up to 20 store openings this year.
Garnier says: “These early results in France have encouraged us to take the next step in our international expansion journey, and we are today announcing the launch of Screwfix in Q3 as a pure-play online retailer in up to 20 European countries.
Following “encouraging learnings and results” from its high street compact store formats, (B&Q Local in the UK, Casto in France and Castorama Express in Poland), Kingfisher said it will continue to adapt and iterate the concept to find the “optimum blueprint.”
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