REG - Kingfisher PLC - Q3 Trading Update

KingfisherAnnouncement

25/11/2024 07:00

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RNS Number : 4819N  Kingfisher PLC  25 November 2024

Q3 trading update to 31 October 2024

 

Sales in line or ahead of the market across all our banners; full year profit
guidance range tightened

 

25 November 2024: Kingfisher plc ('Company', 'Group' or 'Kingfisher') is today
providing its Q3 24/25 sales.

 

Key points

·    Q3 sales of £3.2bn; total sales flat (constant currency) and -0.6%
(reported)

·    LFL -1.1%((1)), with sales in line or ahead of the market for all our
key banners

·    Solid underlying trading in August and September; weak market and
consumer in the UK and France in October, impacted by uncertainty related to
government budgets in both countries

·    Average selling prices flat year-on-year with improved volume trends
versus Q2

·    Q3 by region:

o UK & Ireland: sales growth driven by Screwfix (LFL +1.8%) and TradePoint
(LFL +4.9%), with strong market share gains. Strong growth of B&Q's
e-commerce marketplace (GMV +45%((2)))

o France: sales in line with the market; lower sales trend at both banners in
October due to weak consumer sentiment and adverse weather

o Poland: market share gains with improving 'big-ticket' sales trends

·    Q3 by category:

o Core (69% of sales): improved sales trends (LFL -0.4%)((3)) driven by
repair, maintenance and renovation activity on existing homes

o Big-ticket (16% of sales): LFL -4.0%((4)) with improved trends at B&Q,
Brico Dépôt France and Castorama Poland, supported by new ranges

o Seasonal (15% of sales): sales impacted in October from wetter and milder
than normal weather in our key markets (LFL -0.9%)((5))

·    Q4 trading to date((6)) improved versus exit rate from Q3, with LFL
-0.5%

·    Full year profit guidance range tightened: expect adjusted PBT of
c.£510m to £540m((7)) (previously c.£510m to £550m). Free cash flow
guidance unchanged

·    Expect near-term market outlook to remain uncertain; confident in our
business model, ability to drive market share and effectively manage retail
prices, costs and cash

 

Unaudited Q3 24/25 sales (three months ended 31 October 2024)

 

                      Sales     % Total   % Total            % LFL

                      2024/25   Change    Change             Change((1))
                      £m        Reported  Constant currency  Constant currency
 UK & Ireland         1,617     +1.2%     +1.3%              +0.4%
 - B&Q                936       (1.1)%    (1.0)%             (0.6)%
 - Screwfix           681       +4.6%     +4.6%              +1.8%
 France               967       (6.4)%    (4.2)%             (4.3)%
 - Castorama          503       (7.2)%    (4.9)%             (4.7)%
 - Brico Dépôt        464       (5.6)%    (3.3)%             (3.7)%
 Other International  637       +4.7%     +3.3%              +0.5%
 - Poland             468       +6.6%     +3.7%              (0.4)%
 - Iberia((8))        93        +4.1%     +6.6%              +6.6%
 - Romania            72        (6.9)%    (4.3)%             (2.0)%
 - Other((9))         4         n/a       n/a                n/a
 Total Group          3,221     (0.6)%    -                  (1.1)%

Thierry Garnier, Chief Executive Officer, said:

 

"Overall trading in the third quarter was resilient. Improved performance in
August and September was offset by the impact of increased consumer
uncertainty in the UK and France in October, related to government budgets in
both countries. All our banners in the UK, France and Poland performed in line
or ahead of their respective markets, with particularly strong market share
gains at Screwfix. We continued to see improved volume trends in our core
categories, supported by repairs, maintenance and existing home renovation. As
expected, sales of our 'big-ticket' categories remained soft, although we are
seeing early signs of improvement.

 

"We continue to deliver rapid progress against our strategic and operational
objectives. E-commerce sales penetration increased by 1.3%pts to 18.8% in Q3,
supported by the continued strong growth of our marketplaces. In Q3 our trade
sales penetration reached 16.5% across the Group excluding Screwfix, up nearly
3%pts from the start of the year, as we continued to develop our trade
proposition, including the launch of TradePoint's first mobile app last month.
We are also making strong progress with our plan to restructure and modernise
Castorama France's lowest performing stores, having selected partners for our
first two franchised stores.

 

"Looking towards next year, recent political and macroeconomic developments
have layered incremental uncertainty onto the near-term outlook in our
markets. And so we continue to focus our energy on what we can control -
delivering further market share gains through our key strategic priorities,
and managing our retail prices, costs and cash effectively. As a Group, we are
strongly positioned to benefit from the inflection to come within home
improvement."

 

Current trading and FY 24/25 outlook

Trading in Q4 has started with an improvement versus the exit rate from Q3,
with Group LFL sales -0.5% for the three weeks to 23 November 2024((6)).

 

Our scenarios for the growth of our total addressable home improvement markets
in the UK & Ireland, France and Poland in 2024, compared to 2023, are
unchanged as below:

 

                   Our expectation of total addressable

home improvement market % change in 2024 (YoY)
                   Low case                  High case
 UK & Ireland      Low-single digit decline  Flat
 France            Mid-single digit decline  Low-single digit decline
 Poland            Flat                      Low-single digit growth

 

Consistent with what we set out in September, we believe the UK & Ireland
and Polish markets are currently tracking within the higher end of our
scenarios. We believe the French market is continuing to track at the low end.

 

Given this, together with our performance in the year to date, we have
tightened our FY 24/25 adjusted PBT guidance range to c.£510m to £540m
(previously c.£510m to £550m). We are maintaining a tight control of our
costs, and expect full delivery of c.£120m of structural cost reductions for
the full year as guided.

 

We are also maintaining a significant year-on-year reduction in net inventory,
and our free cash flow guidance range of c.£410m to £460m is unchanged. We
are on track to complete our current £300m share buyback programme in March
2025 and remain committed to returning surplus capital to shareholders.

Impact of recent government announcements in the UK and France

 

Wages

Reflecting on the recent Autumn Budget in the UK, as we have effectively
demonstrated in recent years, we expect to offset the impact of wage increases
through structural cost reductions and productivity gains.

 

National Insurance Contributions and Other Taxes

Regarding higher employers' National Insurance Contributions (NICs) in the UK,
we expect the pro-rated impact in FY 25/26 to be c.£31m, before any
mitigations.

 

In France, the government's draft Finance Bill for 2025 proposes certain
changes to social taxes (equivalent to NICs in the UK) as well as the
postponement of the abolishment of CVAE taxes (a sales-based tax). Assuming
these measures are enacted through the French parliament, we expect the impact
in FY 25/26 to be c.£14m, before any mitigations.

 

The combination of these measures in the UK and France is therefore c.£45m on
Group retail profit. We are developing a range of additional mitigations, but
at this stage expect to offset only part of this impact.

 

Corporation Tax

In addition, we note the French government's proposal to temporarily increase
Corporate Income Tax (CIT) for a two-year period. If enacted, our expectation
is that the Group Effective Tax Rate (ETR) for FY 24/25 would be c.29%
(current ETR guidance is c.27%), with the impact halving in FY 25/26.

 

Technical guidance on net finance costs

Our current expectation for net finance costs next year (FY 25/26) is
c.£115m. This is higher than the current year, due to: (1) an expectation of
lower interest receivable in FY 25/26, based on our current view of cash
balances and deposit rates in 2025, and (2) slightly higher lease interest
linked to lease re-gears.

 

For the current year (FY 24/25), we expect net finance costs of c.£100m
(previously c.£105m).

 

As a reminder, net finance costs exclude our share of JV (Koçtaş) interest
and tax.

 

Q3 trading highlights

All commentary below is in constant currency.

 

UK & IRELAND

Total sales +1.3% (LFL +0.4%), reflecting a resilient overall performance.
This was despite economic uncertainty ahead of the Autumn Budget, which
impacted consumer sentiment, and wetter and milder than normal weather in
October. Performance at B&Q was in line with the market while strong
market share gains were achieved at Screwfix (as measured by the British
Retail Consortium, Barclays and GfK).

 

·    B&Q sales -1.0%. LFL -0.6%, supported by e-commerce and trade
sales, and a sequential improvement in sales to retail customers. Despite the
weaker market in October, overall sales in Q3 improved across all categories
compared to Q2, with positive LFL sales in core and seasonal categories
including tools & hardware, building & joinery and outdoor. As
expected, performance in 'big-ticket' categories remained soft. B&Q's
total e-commerce sales increased by 14.3% YoY, with overall e-commerce sales
penetration increasing to 14.6% (Q3 23/24: 12.9%). This was driven by the
continued growth of B&Q's marketplace (GMV +45%((2))), reaching a
participation((10)) of 41% in October. The business is making good progress
onboarding international sellers to its marketplace, and scaling its retail
media proposition.

·    TradePoint, B&Q's trade-focused banner, delivered a strong
performance with LFL sales growth of 4.9%, reaching its highest penetration of
B&Q's total sales of 24% (Q3 23/24: 23%). TradePoint remains focused on
strengthening its product range, digital and customer service proposition, and
successfully launched its first mobile app in October.

·    Screwfix sales +4.6%. LFL +1.8%, with robust demand from trade
customers supporting positive LFL sales and volume growth in core categories.
Notable performances were seen in its tools & hardware, building &
joinery and outdoor categories. Screwfix opened six new stores (net) in the UK
& Ireland, including two 'Screwfix City' ultra-compact format stores. The
business continued to extend its market-leading Screwfix Sprint proposition,
with Sprint orders growing by c.50% YoY. The results of Screwfix France are
recorded within the 'Other International' division - see below for further
information.

 

FRANCE

Total sales -4.2% (LFL -4.3%), reflecting continued weakness in the broader
market. This was compounded in October by the release of the draft Finance
Bill for 2025, which weighed on consumer sentiment, together with wetter and
milder than normal weather. Based on external panel data and Kingfisher
analysis, both banners performed in line with the market during the quarter.

 

·    Castorama sales -4.9%. LFL -4.7%, with an improvement in LFL sales
and volume trends across all categories compared to Q2 (LFL -9.6%) despite
market weakness in October. Castorama's electrical, plumbing, heating &
cooling (EPHC), outdoor, building & joinery and tools & hardware
categories delivered resilient sales in Q3, while 'big-ticket' categories
remained weak. The business is also seeing positive early results from its
e-commerce marketplace, which launched in March. Castorama continues to test
and adapt its new trade proposition in nine stores, with full roll-out planned
in 2025.

·    Brico Dépôt sales -3.3%. LFL -3.7%, with sales and volume trends
improving across all categories compared to Q2 (LFL -8.3%). The improvement
was supported by softer comparatives, but partially offset by the weak market
and adverse weather in October. Sales performance in the EPHC, building &
joinery and tools & hardware categories were better than the overall Brico
Dépôt average, while a notable improvement in kitchen sales was supported by
the successful launch of new ranges. Brico Dépôt's new trade proposition
continues to resonate with trade customers, with an encouraging level of
sign-ups to its loyalty programme in Q3 and a further increase in trade sales
penetration.

 

OTHER INTERNATIONAL

·    Poland sales +3.7%. LFL -0.4%, with sales supported by continued
progress in addressing trade customer needs. The business delivered a
resilient performance in its core categories, and improved LFL sales trends in
'big-ticket' and seasonal categories. Castorama delivered LFL sales growth in
its kitchen, building & joinery, tools & hardware and EPHC categories.
The business gained market share in the quarter (to 30 September, as measured
by GfK) and opened one big-box store in Q3, reaching its target of five store
openings this financial year. Castorama continues to focus on its engagement
with trade customers, with extended roll-out of specialised colleagues and
trade-dedicated product ranges driving a further increase in trade sales
penetration.

·    Iberia sales +6.6%. LFL +6.6%, with strong sales growth seen in its
building & joinery, surfaces & décors and EPHC categories.

·    Romania sales -4.3%. LFL -2.0%, with a good sequential improvement
supported by positive LFL sales in its building & joinery, tools &
hardware and bathroom & storage categories.

·    In Turkey, Kingfisher's 50% joint venture, Koçtaş, remains focused
on executing its comprehensive restructuring programme to manage performance
in a very challenging macroeconomic and trading environment. We note
significant actions taken to date, including store closures and headcount
reductions, and continue to expect Koçtaş to contribute an overall net loss
of c.£25m to Group adjusted PBT for the full year (FY 23/24: £1m net loss).

·    Other consists of the consolidated sales of Screwfix International
and franchise and wholesale agreements. Screwfix opened one store in France in
Q3, with a total of 26 stores in operation as of 31 October 2024. The business
continues to see encouraging sales trends and remains focused on growing its
customer base, which has doubled YoY to date, as well as increasing brand
awareness both locally and nationally.

 

 

Footnotes

((1)) LFL (like-for-like) sales growth represents the constant currency,
year-on-year sales growth for stores that have been open for more than one
year. The estimated impact of the annual calendar shift on Q3 24/25 LFL sales
was -0.1%.

((2)) Marketplace gross merchandise value (GMV) is the total transaction value
(including VAT, and including returned and cancelled orders) from the sale of
products supplied by third-party e-commerce marketplace vendors. Marketplace
GMV is the basis on which our commissions from third-party vendors are
determined. Please refer to the glossary in Kingfisher's 2024/25 Half Year
Results announcement for full definitions.

((3)) Core category sales represented 69% of Group sales in Q3. It includes
the sales from non-seasonal products across all our categories, other than
'big ticket' sales.

((4)) 'Big-ticket' category sales represented 16% of Group sales in Q3. It
includes the sales from kitchen, bathroom & storage products.

((5)) Seasonal category sales represented 15% of Group sales in Q3. It
includes the sales from certain products within our outdoor, electricals,
plumbing, heating & cooling (EPHC) and surfaces & décor categories.

((6)) 'Q4 24/25 LFL sales (to date)' represents the period from 3 November to
23 November 2024 compared against the equivalent period in the prior year
(i.e., 5 November to 25 November 2023). The figures are provisional and
exclude certain non-cash accounting adjustments relating to revenue
recognition.

((7)) Guidance assumes current exchange rates.

((8)) Brico Dépôt Spain and Portugal.

((9)) 'Other' consists of the consolidated sales of Screwfix International,
and franchise and wholesale agreements.

((10)) Marketplace participation % represents marketplace gross sales as a
percentage of total e-commerce sales.

 

Contacts

                     Tel:                  Email:
 Investor Relations  +44 (0) 20 7644 1082  investorenquiries@kingfisher.com (mailto:investorenquiries@kingfisher.com)
 Media Relations     +44 (0) 20 7644 1030  corpcomms@kingfisher.com (mailto:corpcomms@kingfisher.com)
 Teneo               +44 (0) 20 7420 3184  kfteam@teneo.com (mailto:kfteam@teneo.com)

 

Q3 trading update and data tables

This announcement and data tables for Q3 24/25 sales can be downloaded from
the Investors section of our website at www.kingfisher.com/investors
(http://www.kingfisher.com/investors) .

 

Full year 24/25 results

Our next scheduled results announcement will be our results for the 12 months
ending 31 January 2025, on 25 March 2025.

 

American Depository Receipts

Kingfisher American Depository Receipts are traded in the US on the OTCQX
platform: (OTCQX: KGFHY) http://www.otcmarkets.com/stock/KGFHY/quote
(http://www.otcmarkets.com/stock/KGFHY/quote) .

About Kingfisher plc

Kingfisher plc is an international home improvement company with over 2,000
stores, supported by a team of over 78,000 colleagues. We operate in eight
countries across Europe under retail banners including B&Q, Castorama,
Brico Dépôt, Screwfix, TradePoint and Koçtaş. We offer home improvement
products and services to consumers and trade professionals who shop in our
stores and via our e-commerce channels.

 

Better Homes. Better Lives. For Everyone. At Kingfisher, we believe a better
world starts with better homes and we strive to help make that happen.

 

Forward-looking statements

You are not to construe the content of this announcement as investment, legal
or tax advice and you should make your own evaluation of the Company and the
market. If you are in any doubt about the contents of this announcement or the
action you should take, you should consult a person authorised under the
Financial Services and Markets Act 2000 (as amended) (or if you are a person
outside the UK, otherwise duly qualified in your jurisdiction).

 

This announcement has been prepared in relation to sales for the quarter ended
31 October 2024. The financial information referenced in this announcement is
not audited and does not contain sufficient detail to allow a full
understanding of the results of the Group. Nothing in this announcement should
be construed as either an offer or invitation to sell or any offering of
securities or any invitation or inducement to any person to underwrite,
subscribe for or otherwise acquire securities in any company within the Group
or an invitation or inducement to engage in investment activity under section
21 of the Financial Services and Markets Act 2000 (as amended) (or, otherwise
under any other law, regulation or exchange rules in any other applicable
jurisdiction).

 

Certain information contained in this announcement may constitute
"forward-looking statements" (including within the meaning of the safe harbour
provisions of the United States Private Securities Litigation Reform Act of
1995), which can be identified by the use of terms such as "may", "will",
"would", "could", "should", "expect", "anticipate", "project", "estimate",
"intend", "continue", "target", "plan", "goal", "aim", forecast, or "believe"
(or the negatives thereof) or other variations thereon or comparable
terminology. These forward-looking statements are based on currently available
information and our current assumptions, expectations and projections about
future events. These forward-looking statements include all matters that are
not historical facts and include statements which look forward in time or
statements regarding the Company's intentions, beliefs or current expectations
and those of our Officers, Directors and employees concerning, amongst other
things, the Company's results of operations, financial condition, changes in
global or regional trade conditions (including a downturn in the retail or
financial services industries), competitive influences, changes in tax rates,
exchange rates or interest rates, changes to customer preferences, the state
of the housing and home improvement markets, share repurchases and dividends,
capital expenditure and capital allocation, liquidity, prospects, growth and
strategies, litigation or other proceedings to which we are subject, acts of
war or terrorism worldwide, work stoppages, slowdowns or strikes, public
health crises, outbreaks of contagious disease, environmental disruption or
political volatility. By their nature, forward-looking statements are not
guarantees of future performance and are subject to future events, risks and
uncertainties - many of which are beyond our control, dependent on actions of
third parties, or currently unknown to us - as well as potentially inaccurate
assumptions that could cause actual events or results or actual performance of
the Group to differ materially from those reflected or contemplated in such
forward-looking statements. For further information regarding risks to
Kingfisher's business, please consult the risk management section of the
Company's Annual Report (as published). No representation, warranty or other
assurance is made as to the achievement or reasonableness of, and no reliance
should be placed on, such forward-looking statements.

 

The forward-looking statements contained in this announcement speak only as of
the date of this announcement and the Company does not undertake any
obligation to update or revise any forward-looking statement to reflect any
new information, change in circumstances, or change in the Company's
expectations to reflect events or circumstances after the date of this
announcement or to reflect the occurrence of unanticipated events.

 

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