B&Q owner tightens guidance as housing market improves

B&Q owner Kingfisher has raised its lower-end forecast target despite weak demand for big-ticket items and continued troubles in its French business.
The DIY retailer, which also owns Screwfix, said it expected adjusted annual pre-tax profit of between £510 million and £550 million as it pointed to signs of an improving housing market in the UK. That was up from previous guidance of £490 million to £550 million.
Shares in Kingfisher rose 20p, or 7 per cent, to 310p following the update.
The tightening of guidance came after pre-tax profit rose 2.3 per cent to £324 million in the six months to the end of July.
However, sales fell 1.8 per cent to £6.9 billion during the same period. Like-for-like sales — those from stores open at least a year — were down 2.4 per cent across the group, which has outlets in the UK and Europe.
Thierry Garnier, its chief executive, blamed “weak” demand for big-ticket products such as bathrooms and kitchens. Those items fell 6.8 per cent year on year.
Sales in France fell by 7.2 per cent year on year due to a continued “soft consumer backdrop”. “That market is really, really weak,” Garnier said, adding that the “perception of inflation” in France was higher than in the UK, while political uncertainty in the country had also added to its woes.
Kingfisher said it was making “rapid progress” with its restructuring plan for its Castorama chain in France, with “works completed or in motion on 13 low-performing stores”. Operating costs in the country were down 3 per cent in the period.
Kingfisher runs more than 2,000 shops in eight countries, with Britain and France its biggest markets by some way. Its brands include Koctas in Turkey.
The FTSE retailer enjoyed a boom in demand for DIY products during the pandemic as people used the time offered by lockdowns to spruce up their homes. Profits surpassed £1 billion in the year to March 2022, while the shares peaked above 370p. However, there has since been a decline, thanks to a slowdown in demand amid the cost of living crisis and tough comparatives. Last year Kingfisher issued two profit warnings as it said that a weak economy would dismantle its earnings for the full year.
Garnier, who has been seeking to turn around the group since 2019, pointed to “early good news” in the housing market since the second quarter of the year, as mortgage rates improve. “We believe there is still nine to 12 months’ lag time. Then, over time, the market should improve.”
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Kingfisher said it was on track to achieve about £120 million of cost reductions for the full year, weighted towards the first half.
The company maintained its interim dividend at 3.80p per share. It expects to complete its £300 million share buyback by March next year.