Kingfisher Annual Profit Drops for First Time in Four YearsSarah Shannon
Kingfisher Plc, Europe’s largest home-improvement chain, reported the first annual profit decline in four years and said it expects markets to remain challenging amid waning consumer spending in the U.K. and France.
Adjusted pretax profit fell 11 percent to 715 million pounds ($1.1 billion) in the year ended Jan. 31, the London-based company said today. That compares with the 714.4 million-pound average estimate of 17 analysts compiled by Bloomberg. Still, Kingfisher raised the dividend 7 percent to 9.46 pence a share after ending the year with net cash for the first time.
The owner of France’s Castorama chain and B&Q in the U.K. has seen sales falter as weakening consumer confidence weighs on shoppers’ desire to spend on their homes. A wet summer also slowed sales of seasonal products in the U.K., reducing profit by about 25 million pounds, Kingfisher said. The retailer has resorted to increased promotions, hurting margins.
Cash flow was stronger than anticipated, which “should be taken well by the market,” Philip Dorgan, an analyst at Panmure Gordon said. He has a buy recommendation on the shares.
Kingfisher ended the year with 38 million pounds of net cash compared with net debt of 88 million pounds a year earlier.
The shares rose 1.7 percent to 288.1 pence at 8:20 a.m. in London trading. They’ve gained 1.4 percent this year, giving the retailer a market value of about 6.8 billion pounds.
“We have had a tough year, impacted by unfavorable foreign exchange, record adverse weather in the U.K. and declining underlying markets in each of our three key territories,” of France, the U.K. and Poland, Chief Executive Officer Ian Cheshire said in the statement.
Kingfisher is seeking to boost profitability by getting more products directly from suppliers. The proportion increased to 19 percent in the year, beating the company’s target of 18 percent. The retailer also benefited from increasing the proportion of common products offered across its formats to 8 percent, compared with a target of 7 percent.
A new “handy prices” marketing campaign is planned in the U.K. this year, along with an upgraded website with 20,000 new products for home delivery. The retailer will also extend one-time special buys in Turkey and Spain, and introduce click-and-collect delivery options in France and Turkey.
Kingfisher said it will open 68 stores this year, mainly Screwfix trade outlets, compared with 70 a year earlier.