Kingfisher Q3: Resilient Sales Trends Continue

Kingfisher plc ('Company', 'Group' or 'Kingfisher') is today providing its Q3 22/23 sales [for the quarter ended 31st October 2022].

Kingfisher France and Other International results available here

Key points

• Third quarter sales of £3.3bn; total sales +1.7% in constant currency and LFL +0.2%
  
  
• Sales significantly ahead of pre-pandemic performance (3-year LFL +15.3%), supported by continued market share gains
  
  
• Good start to trading in the fourth quarter with 3-year LFL +16.2% and LFL +2.8% for the three weeks to 19 November 2022
  
  
• Strong energy efficiency product demand supporting DIY sales
  
  
• Trade customers continuing to see robust pipelines; strong TradePoint performance (LFL +1.9% and 3-year LFL +29.5%), and Screwfix gaining significant market share in the UK
  
  
• Opened first two Screwfix stores in France; meaningful step-up in store roll-outs planned for 2023
  
  
• Strong omni-channel engagement with e-commerce sales 3-year growth of +138% (YoY growth of +2.3%); representing 16% of Group sales (Q3 19/20: 8%). Continued growth of B&Q marketplace in Q3, and successful marketplace launches in Spain and Portugal
  
  
• Continuing to deliver value to customers whilst managing inflation pressures effectively
  
  
• Good product availability and effective supply chain management
  
  
• Anticipate FY 22/23 adjusted pre-tax profit in the range of c.£730m to £760m⁽¹⁾

Unaudited Q3 22/23 sales (three months ended 31 October 2022)

Q3 trading highlights

All commentary below is in constant currency. 

UK & IRELAND

Total sales +0.1% (LFL -2.3%; 3-year LFL +12.9%), with trading in Q3 adversely impacted by the abnormally warmer weather in October. Store closures across the UK in relation to Her Majesty's funeral impacted UK & Ireland LFL sales in Q3 by -0.6%.

B&Q sales -2.7%. LFL -3.5% (3-year LFL +13.1%), with sales in line with expectations across all categories. In particular, building & joinery continues to see strong momentum, with a positive LFL supported by demand from trade customers and from high demand of insulation.

Showroom sales performed well in the quarter, with resilient demand in the bathroom & storage category. Whilst outdoor sales were down YoY given a strong comparative from the prior year's clearance activity, sales remain strong versus pre-pandemic levels.

Overall, LFL sales of weather-related categories were -11.5% (+14.6% on a 3-year LFL basis). LFL sales of non-weather-related categories were -1.9% (+11.6% on a 3-year LFL basis).

B&Q's total e-commerce sales moved into positive YoY growth in Q3, driven by its marketplace proposition which continues to see strong growth since its launch in March. Marketplace reached a penetration of 13% in October (i.e., B&Q's marketplace gross sales divided by B&Q's total e-commerce sales).

TradePoint, B&Q's trade-focused banner, continued to outperform with LFL sales +1.9% and 3-year LFL sales +29.5%. TradePoint sales were 23% of B&Q sales (Q3 21/22: 22%).

Screwfix sales +4.9%. LFL -0.5% (3-year LFL +12.4%), with demand from trade customers supporting a strong YoY performance in the building & joinery and bathroom & storage categories. The business saw resilient sales from its tools & hardware and EPHC (electricals, plumbing, heating & cooling) categories.

Screwfix opened 17 new stores in Q3 in the UK and Republic of Ireland, with 48 new stores opened in the year to date, and remains on track to open 80 new stores in these countries during this financial year. In addition, Screwfix opened its first two stores in France (in October and November respectively), with a total of four to five openings planned for this financial year. Note that the results of Screwfix France are recorded within the 'Other International' division.

Thierry Garnier, Chief Executive Officer, said:

"Our sales trends continued to be resilient, with like-for-like sales 15.3% ahead of pre-pandemic levels in the quarter. This was supported by continued market share growth, including strong gains at Screwfix, TradePoint and Castorama Poland. While the market backdrop remains challenging, DIY sales continue to be supported by new industry trends such as more working from home and a clear step-up in customer investment in energy saving and efficiency. DIFM and trade activity also continues to be well supported by robust pipelines for home improvement work.

"Competitive pricing remains a priority. With our customers facing rising living costs, we are determined to make home improvement affordable and accessible - particularly through our own exclusive brands which represent 45% of our sales.  

"We continue to execute our strategy at pace, and to invest for growth. Last month marked a key moment in our history with the opening of our first Screwfix store in France, with a total of four to five stores due to open this financial year and many more planned for 2023. We launched our e-commerce marketplace in Spain and Portugal, building upon the early success of B&Q's marketplace in the UK. We have also launched energy-saving tools in the UK and France, to help customers diagnose and access products and services to increase the efficiency of their homes ahead of the winter. We have seen a very positive take-up of these services so far, with B&Q, for example, taking nearly 1,000 appointment bookings within the first three days of launch. 

"While we continue to be vigilant against macroeconomic uncertainty, we remain confident in both the resilience of our industry and in continuing to grow ahead of our markets."  

Current trading and outlook

The fourth quarter has started well, with good trading momentum. For the three weeks to 19 November 2022⁽⁶⁾ LFL sales were +2.8% and +16.2% on a 3-year basis. Sales remain resilient across our customer segments (DIY and DIFM/trade) and banners, with ongoing strength in energy efficiency product sales and demand from the trade segment.  

Looking ahead, we remain mindful of the current backdrop of heightened macroeconomic uncertainty. We continue to focus on offering customers value at all price points, whilst also managing inflationary pressures effectively. We are confident in our diverse and resilient business model, and our priority remains consistent execution against our strategy to drive top line and market share growth. Furthermore, we remain committed to active and responsive management of our costs, and are on track with our plans to sell through a large part of the 'buffer' stock held as of 31 July 2022.  

Regarding our profit guidance for this year, we anticipate FY 22/23 adjusted pre-tax profit to be in the range of c.£730m to £760m⁽¹⁾. This includes additional P&L investments to strengthen our Screwfix France store opening plan, additional wage support for colleagues, and slightly higher energy costs. 

FY 2022/23 Technical guidance

New guidance, or significant updates to our previous guidance, are noted below in italics. 

Income statement: 

• Space
  -  Net space growth to impact total sales by c.+1.5%, largely from Screwfix and Poland
  
  

• Gross margin %
  -  In line with pre-pandemic level (FY 19/20: 37.0%)

• New businesses
  - 'Other' retail losses of c.£35m (FY 21/22: £10m) (previous guidance c.£30m, with increase driven by additional investment in Screwfix France). 'Other' consists of the consolidated results of Screwfix International, NeedHelp, and franchise agreements, recorded within the 'Other International' division
  
  - Retail loss of c.£5m in relation to investment in B&Q's e-commerce marketplace, recorded within the results of B&Q in the 'UK & Ireland' division
  
  
• Central costs
  -  Broadly flat YoY (FY 21/22: £60m)
  
  
• Net finance costs
  - Decrease by c.£20m mainly as a result of lower interest expense on lease liabilities (FY 21/22: £137m)
  
  
• Adjusted pre-tax profit
  - Full year adjusted pre-tax profit in the range of c.£730m to £760m⁽¹⁾ (previously c.£770m, with trading scenarios for the balance of H2 providing a potential range of outcomes of c.£730m to £770m)
  
  
• Tax rate
  - Group adjusted effective tax rate of c.22%⁽⁷⁾ (FY 21/22: 22%)

Balance sheet and cash flow:

• Inventory - anticipate reduction of stock levels in H2 22/23 related to sell-through of a large part of 'buffer' stock previously held to protect product availability
  
  
• Capital expenditure - targeting gross capex of c.3.5% of total sales (FY 21/22: £397m; c.3.0% of total sales)
  
  
• Tax - in February 2022, a payment of €40m (c.£34m) was made to the French tax authorities with regards to a historic tax liability. The amount was fully provided for in prior periods
  
  
• Share buybacks - c.£315m outflow for share buybacks (c.£145m for the first £300m programme completed in April, and a further c.£170m related to the second £300m programme) (previous guidance c.£325m outflow)
  
  
• Dividends - £246m outflow for dividends (£172m related to the FY 21/22 final dividend of 8.60p, and £74m related to the FY 22/23 interim dividend of 3.80p). For the total dividend in respect of FY 22/23, our dividend policy target cover range remains 2.25 to 2.75 times, based on adjusted basic earnings per share

Source : Kingfisher

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