Kingfisher expected to report drop in B&Q's Q2 sales

Kingfisher is expected to announce a further slide in B&Q sales, when they update the City on their latest results at 7am tomorrow, as the weakening housing market impacts on their performance.

The DIY chain is tipped by analysts at Jefferies to report as much as a 4% slide in like-for-like sales in Q2. They pointed to a “softer housing market” contributing to its forecast, which follows a number of surveys showing that Britain’s residential property market has cooled considerably since the Brexit vote last year.

George Salmon, equity analyst at Hargreaves Lansdown, also highlighted softening seasonal sales, which had helped its performance in the first quarter. He added: “The worry heading into the second quarter update is the seasonal boost doesn’t appear again, and a slower housing market drags UK sales down.”

Kingfisher has also been battling a stalling housing recovery in France, where their Castorama and Brico Depot chains have also seen faltering sales. In the three months to 30th April 2017, it was weakness in France that offset growth in the UK, sending overall group like-for-like sales down 0.6%.

Read - Kingfisher Q1 Trading Update

However, the one highlight will once again be Screwfix, who's apparent unstoppable growth has helped to bolster Kingfisher performance during the last 12 months. The chain has consistently delivered double-digit sales increases and is once again likely to report like for like sales in the region of +10%.

In March, chief executive Veronique Laury, who has been overseeing a turnaround at the firm, said Kingfisher had finished its B&Q store closure programme, which has seen it shut 65 shops and slash around 3,000 jobs in the UK and Ireland over the last two years.

As part of Ms Laury’s revival, she is aiming to boost profits by £500 million a year by 2021. The firm has also flagged that the EU referendum has “created uncertainty for the UK economic outlook”, something that has been reflected in Kingfisher’s share price, which has fallen from 363p in August 2016 to around 308p today.

Ian Forrest, investment research analyst at The Share Centre, said: “It has been a fairly dismal year for shares in the owner of B&Q and Screwfix. Followers of the group will be looking to see if Screwfix in the UK is still performing well. Any update on the long-term plan to unify the group’s back office systems, cut back the number of product lines and reduce costs will also be of interest to the market.”

Andrew Hughes, broker at UBS added "A number of unwelcome developments are combining to make life difficult for Kingfisher, in our view," writes analyst Andrew Hughes.

"The ONE Kingfisher plan has had a bumpy start in FY18, B&Q is beset by a weaker macro, falling house prices and rising core DIY market capacity, while in France market share is also under pressure and the market has yet to react to stronger housing stats."

Cutting estimates for the B&Q business and fearing the unified product programme could now take up to seven years, UBS downgrades profit by 2%, 4% and 9% for the next three years.

Read - Morgan Stanley expects One Kingfisher may fail

Kingfisher will be announcing their Q2 results at 7am tomorrow morning, so don't forget to check Insight DIY regularly for all the very latest news, analysis and commentary.

Source: Insight DIY Team

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