Bust can easily follow boom. UK-listed DIY retailer Kingfisher has been trying to avoid that scenario since its pandemic boost faded. A cost of living crisis, higher energy prices and rising wages all added to the gloom last year. At least the company managed to maintain a degree of momentum, full-year results on Tuesday showed.
Like-for-like sales in the 12 months to January were more than 15 per cent higher versus pre-pandemic levels. But they were down 2.1 per cent year on year.
Working-from-home trends have faded but not completely reversed. Part-timers are still spending to refurbish their properties when they can. Kingfisher shares have rallied sharply from October lows. But a valuation back at levels last seen in early 2022 lacks support as economic worries return.
Surveys suggest estate agents in the retailer’s key UK market are at their gloomiest since 2009. Uncertainty over the course of interest rates remains. The turmoil in banking markets is yet to spill into a credit crisis but knock-on effects on consumer confidence are possible. DIY retailers, despite their best efforts to shake off their cyclical label, remain vulnerable.
Kingfisher has diversification on its side; UK brands B&Q and Screwfix cover different customer bases. Even so, sales growth in the fourth quarter of last year slowed.
Adjusted pre-tax profits dropped 20 per cent to £758mn compared with Kingfisher’s record year in 2021-22. The out-turn was at the top end of the company’s guided range. Analysts are expecting profit to drop lower again this year to £633mn. A share price to forward earnings multiple of 11 times is in line with its five-year average.
Since taking the helm in 2019, chief executive Thierry Garnier has helped to soften the blow from economic volatility. Cost cuts in areas such as supply and logistics have offset rises elsewhere. Further share buybacks are promised for later this year, once a current £300mn programme has completed.
Garnier is trying to paint an optimistic picture but he can do little to plaster over cracks in the housing market or another potential lurch in consumer confidence.
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