Kingfisher H1 26/27 Earnings Report

Kingfisher EPS Results

• Actual EPS: GBX 17.80
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Kingfisher Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Kingfisher Announcement Details

• Quarter: H1 26/27
• Date: 9/22/2026
• Time: Before Market Opens
• Conference Call Date: Tuesday, September 22, 2026
• Conference Call Time: 4:30AM ET

Kingfisher (LON:KGF) is an international home improvement company with over 1,800 stores, supported by a team of more than 70,000 colleagues. We operate in seven 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.

Kingfisher H1 26/27 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Kingfisher upgraded its full-year outlook, raising adjusted profit-before-tax guidance by £20 million at the midpoint to £595–£635 million and free-cash-flow guidance to £480–£520 million.
• Positive Sentiment: H1 adjusted profit before tax rose 9.9% to £404 million, while adjusted EPS increased 16%; gross-margin expansion and £44 million of structural cost reductions more than offset £48 million of operating-cost inflation.
• Positive Sentiment: Screwfix remained a standout performer, with UK like-for-like sales up 5.6%, supported by its rewards programme, strong customer retention and share-of-wallet gains; Screwfix France’s store like-for-like sales rose 48%, although management is prioritising profitable store economics before accelerating expansion.
• Positive Sentiment: Strategic growth channels continued to scale: group trade sales excluding Screwfix grew 16%, e-commerce sales excluding Screwfix rose 16%, marketplace GMV increased 42% and retail media grew 75%; Poland and Iberia also delivered strong sales and profit growth.
• Negative Sentiment: Trading conditions remained mixed, with weakness in big-ticket categories—particularly bathrooms—DIY and building-related demand affected by heatwaves, and B&Q core sales down 2.7%; management also flagged supplier price-increase requests, freight pressure and the non-repeat of some first-half benefits such as the Romania disposal contribution.

Presentation

[Operator]

Good day, ladies and gentlemen, and welcome to the Kingfisher plc half year 2026/2027 results. At this time, all participants are on a listen-only mode. Following the presentation, we will conduct a Q&A session with research analysts. If you wish to ask a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. Instructions will also follow at the time of the Q&A. I would like to remind all participants that this call is being recorded. I will now hand over to Thierry Garnier, Chief Executive Officer, to start the presentation.

[Thierry Garnier, CEO at Kingfisher]

Good morning, and thank you for joining us for Kingfisher's half-year results presentation. Bhavesh and I will take you through our performance for the first half, our upgraded outlook for the year, and the continued progress we are making across our strategic priorities. We will then answer your questions. Let me start with the highlights. First, our strategy is delivering with momentum building across our key growth drivers. Screwfix continues to perform strongly, while trade, e-commerce, and marketplace are becoming increasingly important sources of growth. Second, our focus on execution continues to pay off, reflected in gross margin expansion, discipline, cost control, and strong profit growth despite a mixed market environment. Third, our performance gives us the confidence to upgrade our full-year guidance. We are building a stronger, more resilient Kingfisher with significant opportunities ahead while remaining committed to attractive shareholder return.

[Thierry Garnier, CEO at Kingfisher]

Let me now hand over to Bhavesh for the financial review.

[Bhavesh Mistry, CFO at Kingfisher]

Thank you, Thierry, and good morning, everyone. Overall, H1 was a solid delivery against our financial priorities. Sales, including GMS from our marketplaces, grew 1.6% in a mixed market environment. Adjusted profit before tax was up 9.9% to GBP 404 million, reflecting strong gross margin performance and disciplined cost control. Through our profit performance and share buyback program, adjusted earnings per share grew 16%. After investing in our strategic priorities, we generated free cash flow of GBP 339 million. Net leverage stands at 1.4x, and we maintain a very healthy balance sheet. Our top-line performance was underpinned by resilient core and good seasonal sales, more than offsetting weakness in big-ticket categories. In the half, we saw growth in customer transactions in a mildly deflationary environment. Core sales saw broad-based growth across repair and maintenance categories, including tools and hardware, joinery, and electrical.

[Bhavesh Mistry, CFO at Kingfisher]

Our growing share of sales to trade customers supported resilience while DIY demand was softer. During the summer heat waves, core sales were impacted as the hot weather made it harder to undertake projects such as larger building works, tiling, and painting. Within seasonal, demand for cooling and outdoor leisure products was strong, while categories such as plants, outdoor paint, and fencing were weaker. We also saw a shift towards online purchases. Overall, seasonal sales grew in the half against strong competitors, with all banners delivering growth in Q2. In big-ticket categories, we continued to outperform the kitchen market in the U.K. and Poland, reflecting the investments we have made into our ranges, showrooms, and in Poland, design studios. On the other hand, the bathroom market remained challenging across our geographies and our ranges underperformed the market.

[Bhavesh Mistry, CFO at Kingfisher]

In response, we have initiated a comprehensive range review with encouraging early results from the launch of our new bathroom furniture range and Imandra 2. In the U.K., the market continues to be soft, broadly consistent with recent quarters. B&Q performed in line with the market and outperformed when including marketplace GMS. Marketplace contributed GBP 12 million of profit in the half. TradePoint continued to take share in a subdued trade market, capitalizing on investments we have made in our trade proposition. Screwfix delivered another outstanding performance with like-for-like sales growth of 5.6%, significantly outperforming the market. Growth was volume-led and supported by momentum from our rewards program, with existing customers increasing their spend and new customers joining the platform. Screwfix's strong proposition of proximity, availability, and speed makes us confident it can continue to gain share. U.K. and Ireland retail profit increased 4.9% to GBP 361 million.

[Bhavesh Mistry, CFO at Kingfisher]

This includes a GBP 14 million business rates refund in the period. The French market was broadly flat in the period with strong seasonal demand in Q2. At Castorama, like-for-like returned to growth in Q2, a fourth consecutive quarter of sequential improvement supported by our revamped stores, successful range reviews, and strong seasonal performance. Like-for-like sales, including marketplace GMS, were +0.4%, and performance was in line with the market. At Brico Dépôt, like-for-like sales declined 4.2%, reflecting weaker demand for building materials and larger projects during the summer heat waves, as well as some temporary disruption in the customer experience following the implementation of our new website. Brico continued to make good progress in trade with sales up 21%. France retail profit increased to GBP 74 million, with retail margin improving 10 basis points, reflecting our continued focus on margin and cost discipline.

[Bhavesh Mistry, CFO at Kingfisher]

Our strategy to transform Castorama is delivering tangible results. We have now addressed 24 stores across the network with encouraging results. Right-size stores are delivering double-digit improvements in sales densities, while revamped stores are generating a higher profit contribution than the Castorama estate average. Nine further stores are on track to be addressed in the second half of this year. Following the successful open of two franchise stores last year, today we also announced the transfer of a third store to franchise. This year, we are reviewing 20% of our ranges. Those ranges already reviewed are growing 5.1%, with some growing double digits. Alongside strengthening our stores and ranges, Castorama is making good progress on trade and e-commerce, enabling growth into new customer segments and categories. Trade penetration increased 6.5 percentage points, e-commerce sales grew 11%, and marketplace is profitable after only two years.

[Bhavesh Mistry, CFO at Kingfisher]

Poland delivered a strong first half with total sales up 3.6% and like-for-like sales up 2.2%. We gained share in a growing market supported by trade, e-commerce, and design-led categories. Strength in core was driven particularly by internal building categories. Trade sales grew 14%, e-commerce sales grew 39%, and marketplace reached breakeven. Retail profit increased 15.7% to GBP 60 million, with margin up 60 basis points. Iberia also delivered a strong market outperformance with like-for-like sales growth of 7.7%. Growth was supported by our competitive price position and strong momentum in trade and e-commerce. We also opened two stores, our first Iberia openings in a decade. Retail profit increased 17% to GBP 13 million, with retail margin increasing 30 basis points. Screwfix France continues to build momentum with store like-for-like sales increasing 48%.

[Bhavesh Mistry, CFO at Kingfisher]

We are seeing progress in the key leading indicators with growing brand awareness, strong repeat customer purchases, around 55% trade penetration, and an increasing network effect as density builds. Importantly, the earlier cohorts are showing continuous strong growth. This year, we have opened two stores, and in the second half, we will be opening another three, bringing our total store count to 37. We delivered solid profit growth of 9.9% in the half. Excluding the one-off business rates refund in the U.K., profit growth was 6.1%, reflecting good operational and financial discipline. To support future growth and enhance our e-commerce capabilities, we continue to invest in technology, including our marketplace platform. We face GBP 48 million of operating cost inflation, including two months of increased national insurance contributions in the U.K.. These headwinds were more than offset by strong gross margin delivery and structural cost reductions.

[Bhavesh Mistry, CFO at Kingfisher]

Gross margin added GBP 40 million delivered through the strength of our group buying and sourcing, marketplace and retail media growth, foreign exchange tailwinds, and the disposal of Romania last year, partly offset by freight headwinds and a higher trade mix. We delivered GBP 44 million of structural cost reductions, including distribution center space optimization, procurement efficiencies, and store operating model improvements. Looking ahead, we continue to see further opportunities from buying and sourcing, marketplace, retail media, and supply chain optimization. In parallel, we continue to drive productivity across the group with additional opportunities across stores, head offices, and global business services. We are also committed to generating strong free cash flow and to delivering attractive returns to shareholders. In H1, Kingfisher generated adjusted EBITDA of GBP 784 million. Working capital delivered a net inflow of GBP 5 million.

[Bhavesh Mistry, CFO at Kingfisher]

We have made good progress on inventory since 2022 and see further runway for working capital improvement through multiple structural actions. Some examples of actions we are taking include reducing supplier lead times, negotiating lower minimum order quantities, and moving slow-turning first-party ranges to marketplace. We invested GBP 171 million in capital expenditure, prioritizing growth, including nine new stores, new ranges, and technology. Overall, we generated free cash flow of GBP 339 million, and our strong cash generation continues to support attractive shareholder returns. We returned GBP 333 million to shareholders through dividends and share buybacks during H1. Today, we also announced an interim dividend of GBP 0.038 per share, in line with last year. By the end of December, we will have completed GBP 175 million of our GBP 300 million share buyback program. When we set out our guidance at the start of the year, we observed a mixed consumer environment.

[Bhavesh Mistry, CFO at Kingfisher]

We anticipated a limited impact from events in the Middle East on our energy and freight costs and rational pricing behavior across our markets. We also expected to continue our long track record of maintaining competitive prices while managing gross margin and cost effectively. Broadly, that is what we have seen in the first half, and our assumptions for the second half remain largely unchanged. Reflecting our solid H1 performance, we are upgrading our adjusted profit before tax guidance to a range of GBP 595 million-GBP 635 million, an increase of GBP 20 million at the midpoint. We are also upgrading our free cash flow guidance by GBP 20 million and now expect free cash flow of between GBP 480 million and GBP 520 million. With that, I will now hand back to Thierry.

[Thierry Garnier, CEO at Kingfisher]

Thank you, Bhavesh. Our first half performance reflects strong momentum across our four strategic priorities: growing our trade business, scaling our digital ecosystem, winning through our offer, own exclusive brands and services, and growing our banners and format. Starting with trade, an important high-value customer segment for us, group trade sales reached GBP 2.1 billion and grew 16% when excluding Screwfix. Trade penetration increased more than 3 percentage points to 31% of sales. A key foundation of this is a rollout of dedicated trade zones within our existing stores, with tailored ranges, faster service, and specialist colleagues serving our trade customers. Outside Screwfix, trade zones are now present in 49% of our stores. At Castorama France, pro zones are present across the estate, while Brico Dépôt France now has 14 pro corners. The pro zones are the starting point for building our relationship with the trades.

[Thierry Garnier, CEO at Kingfisher]

It is where we identify and get to know them and where we educate them about our pro-specific product and service offering, over time capturing more of their spend. 58% of our stores now host a trade sales partner. These colleagues provide a bespoke service to higher-value customers, helping them save time, adopt relevant services, and consolidate more of their spend with us. At TradePoint, we are seeing tangible results from this model. Sales from customers covered by a trade sales partner grew 23%, allowing TradePoint to gain market share in the half. Poland is following a similar pattern. Across our banners, we now have 438 trade sales partners enrolled and see significant scope to scale this model through further recruitment, sales training, and our trade credit solution. We believe that moving towards more relationship-based customer growth is our number one lever to continue to take share in the trade market.

[Thierry Garnier, CEO at Kingfisher]

As you heard from Bhavesh, Screwfix performed strongly in H1. As well as being a well-oiled machine with a dense store network, high availability, and fast fulfillment, Screwfix is generating continued momentum with its rewards program and successfully growing customer share of wallet. Less than a year since launch, Rewards now has more than 2.3 million active customers and accounts for 44% of total sales. Rewards also allows us to personalize our offers with features such as recommendations based on trade type, brand affinity, and local weather. This is resulting in an increase in average order value of our highest value customers as they dedicate more of their spend to Screwfix. Screwfix is also seeing strong customer demand for a broader product range.

[Thierry Garnier, CEO at Kingfisher]

Given the compact footprint of our Screwfix stores, it would not be practical nor economic to stock the full breadth of product our customers are looking for. To address this, as an example, we have partnered with Footsure, one of our vendors, to offer more than 12,000 footwear SKUs across a wide selection of styles and sizes. Products are picked, packed, and shipped by Footsure directly to our stores, with 70% of orders collect in stores. This partnership generated GBP 12 million of sales in its first year, demonstrating the opportunity to expand customer choice without adding complexity to our store operation. We are now ready to build on this success and scale the model. Our stores sit at the heart of a digital ecosystem that creates a virtuous cycle. Stores support fast and convenient first-party fulfillment. Marketplace broadens choice and attracts traffic.

[Thierry Garnier, CEO at Kingfisher]

Apps and loyalty programs generate valuable data, and that traffic and data support personalization, retail media, and further profit growth. Our investments in AI and technology also position us for the next phase of commerce, including natural language search and agent-enabled shopping. This ecosystem continues to scale across Kingfisher. E-commerce sales reach GBP 1.6 billion and grew 16%, excluding Screwfix, while penetration increased to 22% of sales. Screwfix remains the most digitally advanced banner, with 60% of sales coming through digital channels, while the strongest digital growth in the half came from our other banners. B&Q reached 20%, Castorama France now 10%, and there is further opportunity, our target being 30% e-commerce penetration across Kingfisher. A key driver of our e-commerce growth is marketplace, which complements our first-party offering with a much broader range of third-party products.

[Thierry Garnier, CEO at Kingfisher]

Marketplace GMV grew 42%, representing 18% of e-commerce sales and contributing more than GBP 13 million of retail profit. With a robust foundation in place, we also see good momentum in retail media, which grew 75% in the half. An important area of marketplace progress has been the further extension of customer choice. B&Q marketplace now offers close to 5 million SKUs. Growth is coming from categories that complement our offer. A good example is cooling products, which were in high demand during the recent heatwaves. We already have strong representation from U.K.-based vendors on our marketplace. In addition, we have now onboarded more than 80 international merchants, which today account for less than 10% of GMV. Mature marketplaces generate 70% of their business with cross-border trade, so you can see the further potential ahead of us.

[Thierry Garnier, CEO at Kingfisher]

The strength of our model lies in combining the scale and choice of our marketplace with the convenience and immediacy of our store network. Customers benefit from a broader product range and faster, more flexible fulfillment, and this includes marketplace click and collect, three-hour delivery direct to site at B&Q, and the expanding reach of Screwfix 30-minute Sprint delivery service. As we extend choice, we are also investing in making the shopping journey easier. With the introduction of Buybox, we are helping customers find the best available offer for products sold by multiple vendors. In addition to enhancing our in-house digital agents with voice capability, we are rolling out natural language search on our website based on our partnership with Google. In parallel, we continue to deploy AI selectively with a clear focus on investment returns.

[Thierry Garnier, CEO at Kingfisher]

Our new content platform, Fabric, creates high-quality product content in minutes, improving speed to market, search engine optimization, and conversion. Our own exclusive brands continue to combine affordability, quality, and innovation. in the half, our new outdoor ranges grew sales 8%, leaning into the growing outdoor living trend. The launch of Imandra 2 marks the start of our comprehensive bathroom range review and is off to a good start. In power tools, the sales of our expanded Mac Allister and Titan ranges increased 11% since launch. The growth drivers I have outlined underpins Kingfisher's attractive investment story. We have leading positions in our markets. We operate a diverse portfolio of banners, each with distinct formats and proposition that address a wide range of customer needs.

[Thierry Garnier, CEO at Kingfisher]

Our strategic growth drivers are allowing us to grow our market share and to move into new market segments, making Kingfisher a more resilient business and giving us confidence in our continued performance against our financial priorities, growing our sales rate of our markets, increasing our profit rate of sales, and generating strong free cash flows. To summarize, we delivered strong momentum across our strategic growth drivers, along with solid profit growth by controlling what is in our control, and we have upgraded our guidance based on our first half performance and the opportunities ahead. We are building a stronger and more resilient Kingfisher, and we remain confident in our sustained performance. With that, let us move to Q&A. Thank you, everyone.

[Operator]

We will now begin the Q&A session. If you wish to ask a question, please use the raise hand function at the bottom of your Zoom screen. If you have dialed in, please select star nine on your keypad to raise your hand and star six to unmute. I'd like to remind all participants that this call is being recorded. We will pause a moment to allow the queue to form. Our first question comes from Richard Chamberlain with RBC. Please unmute your line and ask your question.

[Richard Chamberlain, Analyst at RBC]

Yeah, thank you very much.

[Thierry Garnier, CEO at Kingfisher]

Morning, Richard.

[Richard Chamberlain, Analyst at RBC]

Morning, Thierry. Morning, Bhavesh. Two questions from me, please, if I can start things off. First on trade sales partners. You talk about scaling the model, Thierry, and I just wondered how we should think about that in terms of the number of partners you are looking for across the TradePoint and Castorama banners, or the percentage of sales you would expect those partners to generate. That is the first one. Then second, on the gross margin outlook, obviously very strong performance in the first half. How do you see those main drivers that you talk about in the first half evolving in the second half? Thank you.

[Thierry Garnier, CEO at Kingfisher]

Thank you, Richard. Let me start with the first question. I think the sales is a combination of number of trade sales partners and somehow the sales per trade sales partner. We see on the first part, we see more trade sales partner in the future. We are really very happy with the results. You can, if I draw a few years from now, you could have one to two trade sales partner in every store in the medium term. Then the other job we are doing is to, and that is really a very important KPI of us, is the sales per trade sales partner. We are looking at the best trade sales partner in the network, the worst one. We are actively managing them. We are creating new bonuses to incentivize them.

[Thierry Garnier, CEO at Kingfisher]

We have created a specific software to help them to follow this portfolio of VIP customers. Lots going on, training as well. Lots going on in order to increase a sales partner. Looking at this combination, in my view, you have a few years of growth ahead of you.

[Richard Chamberlain, Analyst at RBC]

Okay.

[Bhavesh Mistry, CFO at Kingfisher]

Hi, Richard. Thanks for your question on.

[Richard Chamberlain, Analyst at RBC]

Hi, Bhavesh.

[Bhavesh Mistry, CFO at Kingfisher]

Gross margin. I get really pleased with what we delivered in gross margin in the first half. A lot of it, the things you heard me talk about before in terms of structural actions that we are taking. What helped us in this first half was our buying and sourcing. Our group buying and sourcing scale, we continue to drive that. Marketplace, you heard us on our prepared remarks talking about the profitability of marketplace, and what we delivered in the first half alone was more than what we delivered the entirety of last year in marketplace profit. Retail media. We had some FX tailwinds on our committed purchases. All structural things largely that helped us in the first half. I would remind you that about 10 basis points of the 70 basis points was our sale of Romania last year, so you will not see that in the second half.

[Richard Chamberlain, Analyst at RBC]

Okay.

[Bhavesh Mistry, CFO at Kingfisher]

And then we had some headwinds, freight, and a growing share of trade. So, when we look to our second half, it is the same structural actions that we will continue to push forward. Buying and sourcing scale, marketplace, retail media. We are getting a little bit of supplier inflation, so price request increases. Obviously, we are mitigating and pushing that back. Our OEB business and the scale of our sourcing gives us the ability to push back against that, but that is something we will watch closely in H2.

[Richard Chamberlain, Analyst at RBC]

Okay, excellent. Thank you.

[Thierry Garnier, CEO at Kingfisher]

Thank you, Richard.

[Operator]

Thank you. Our next question comes from Tim Ramskill with Bank of America. Please unmute your line and ask your question.

[Tim Ramskill, Analyst at Bank of America]

Thanks. Good morning.

[Thierry Garnier, CEO at Kingfisher]

Morning, Tim.

[Tim Ramskill, Analyst at Bank of America]

I've got three, please. Morning. Three questions, if that's okay. Just a little bit on big ticket, observations around difference in performance on kitchen versus bathroom. Just, maybe you can scale that kind of degree of outperformance and underperformance in those two categories, please. Secondly, Poland. Perhaps we don't spend enough time focused on it, but clearly very material improvement both in gross margin and overall margin in the first half. Just really interested in more of a medium term question about the recovery potential in Poland. Clearly was a much more profitable business once upon a time. Then thirdly, just interested in your thoughts around Screwfix's performance relative to its closest peer, Toolstation. I might be wrong in saying this, but it feels like the gap in like-for-like performance between those two competitors is the widest it's been for a very long time.

[Tim Ramskill, Analyst at Bank of America]

I'm sure you'll just focus on yourselves rather than them, but just interested in what you pick up in terms of feedback or anything else that you think explains that very meaningful advantage you seem to be enjoying there. Thank you.

[Thierry Garnier, CEO at Kingfisher]

Thank you, Tim. Maybe I will answer one and three, and Bhavesh will answer on Poland. I think big ticket, a few consideration. We are happy with our kitchen business. We have had a lot of range reviews. We have a lot of action in stores from dedicated training and a lot of sales force management in the U.K. We are creating design studio in Poland. France as well has a lot of additional action. Overall pleased with kitchen. Not happy with bathroom. I think the market is a bit softer than kitchen. But overall we are not happy with ourself. We believe we could do a better job on bathroom. We identify already months ago that our ranges were not modern enough. We were lacking some color, some design, and we are building the new ranges at group level called Imandra.

[Thierry Garnier, CEO at Kingfisher]

You see that in the prepared remarks. We are now starting to roll out across the group this new range of bathroom, starting with Castorama in France. Pleased with the early start of Imandra in France. Last comment I would do, you need to look at digital as well. When we look at our bathroom business on marketplace, it's extremely strong. So having a very big online business now on marketplace allow us to capture some of the shift of the market. We believe as well the bathroom is moving more online, and that's something we are getting through our marketplace. Screwfix U.K., I don't want to comment too much on competitor. I don't think it's for me to do that. I think we are really pleased with volume. We are really getting growth through the volume of items sold.

[Thierry Garnier, CEO at Kingfisher]

Through a new initiative, we are opening a few store, but many is around share of wallet. I've said that in the past. We are broadly at 15% of share of wallet for Screwfix. So you see we have more to go after. You have seen in our remarks, we have launched very successfully a new loyalty program. Rewards. It's allowing us to personalize our offerings and somehow to increase the shop wallet. We're increasing choices through this vendor to stores model. When you stay in the Screwfix ecosystem, but to enlarge your number of SKUs, that's something we are looking forward to scale up in the coming months. We are as well doing more B2B business, selling more to larger companies. So lots going on at Screwfix at the moment. Indeed, we feel good around the competitive position of Screwfix at the moment.

[Bhavesh Mistry, CFO at Kingfisher]

Hi, Tim. Thanks for your question on Poland. Look, really pleased with the performance of Poland. Three quarters of top line growth is fantastic to see. When you look underneath the numbers, what's really encouraging is strong core performance. So we saw a consistent and strong core performance Q1 and Q2. Trade and e-commerce, our strategic levers are performing well, so really pleased with the execution from the Polish team. Significant outperformance in kitchen. We talked about design studios. So these are in shopping malls where we showcase some of our kitchen product, and that's really helping. Early days, but really seeing meaningful impact from our design studio. So overall, really pleased. We outperformed the market.

[Bhavesh Mistry, CFO at Kingfisher]

Over the medium term, we feel pretty optimistic about Poland. There's a lot of white space that we can go after the tier two cities with our medium and compact format. Pleased with Poland.

[Tim Ramskill, Analyst at Bank of America]

Against the margins.

[Bhavesh Mistry, CFO at Kingfisher]

Against the supportive backdrop.

[Tim Ramskill, Analyst at Bank of America]

Sorry. I was going to say.

[Bhavesh Mistry, CFO at Kingfisher]

Sorry, Tim, say that again.

[Tim Ramskill, Analyst at Bank of America]

Where do you think you, and just thoughts on.

[Thierry Garnier, CEO at Kingfisher]

I think maybe, Tim, on that we were.

[Tim Ramskill, Analyst at Bank of America]

Margin now versus where it was before.

[Thierry Garnier, CEO at Kingfisher]

Yeah, I think when you think about pre-COVID, Poland was above 10%. We felt probably was too much. We were in limited number of stores. The top line sales were not what it should be. I do not think we will ever come back at this level. Nevertheless, I agree with you that the profit margin of Poland will improve. You start to see that this year. We expect Poland to improve its profit margin in the coming years.

[Tim Ramskill, Analyst at Bank of America]

Great. Thank you very much.

[Thierry Garnier, CEO at Kingfisher]

You are welcome.

[Operator]

Thank you. Our next question comes from Izabel Dobreva from Morgan Stanley. Please unmute your line and ask your question.

[Izabel Dobreva, Analyst at Morgan Stanley]

Hello. Good morning.

[Thierry Garnier, CEO at Kingfisher]

Morning, Izabel.

[Izabel Dobreva, Analyst at Morgan Stanley]

Thank you for taking my questions. I had three. The first one is just to follow up on the bathroom range review. Could you tease out in a little bit more detail what you are changing in this offering? Do you currently offer a full project service in the same way you do for kitchens, and is that something you are studying? I guess the point of the question is to understand how quickly you expect to be able to turn this underperformance around. My second question is on the marketplace. It appears that the drop-through rates and the profitability have improved.

[Izabel Dobreva, Analyst at Morgan Stanley]

Could you comment where you are on that customer acquisition curve for the U.K. business and whether you would expect the profitability in France and Poland to ramp up more quickly now for those two geographies than they did for the U.K. in the early stage? My last question is a quick one just on the gross margin. We have heard you loud and clear on the structural initiatives. Is there anything seasonal or cyclical that you would call out which might have helped the performance this half?

[Thierry Garnier, CEO at Kingfisher]

Thank you, Izabel. On bathroom, what we change is things like new colors, new design for cheaper price. We are able to offer the new collection for same quality of product cheaper, and as well introducing new color and new design. We already have a relatively full service. We have a team of designer in all our stores. We have software to create 3D design. We offer installation, we offer credit. So already lots going on here. If you ask me, I am fully happy with the way we do installation, et cetera. I think we can grow further and we are growing this business. When you roll out across thousands of store, big showrooms, it takes a few months. You have to change part of the showrooms.

[Thierry Garnier, CEO at Kingfisher]

We have an approach step by step, starting with Castorama France, Brico Dépôt, then you will see Poland, and then B&Q in the coming months. Quickly maybe on the marketplace. First, potential to grow the sales. You probably heard that we are now pushing hard on non- If you take the B&Q non-U.K. vendors, we are pretty happy with the U.K. vendors. We only have 80 non-U.K. vendors. It is less than 10% of our marketplace sales. When we look at very mature marketplaces in the world, they are more at 70%. We really are seeing a very strong traction on non-U.K. vendors. Functionality like Buybox increase, in fact, the price index and the price competitiveness because you allow competition on the same SKU of multiple vendors, and somehow we organize this competition. That is very helpful.

[Thierry Garnier, CEO at Kingfisher]

Then the profit is a combination of your fixed cost and your marketing cost. The more you grow your sales, the more you reduce your fixed costs. Fixed costs are not very large, but that is still a consideration, and that it is how much marketing you want to invest. What I said in previous calls, you usually start first year of marketplace around 10% marketing cost. In the long run, you are probably around 3% marketing cost. We are on this journey, and we expect more profit drops through in the future. Another consideration is the take rates. We have between 10% and 15% of the take rates. One of the action we are doing is increasing the services we can sell to vendors from retail media to fulfillment. We are as well testing fulfillment for vendors.

[Thierry Garnier, CEO at Kingfisher]

There are many services you can offer to your vendors to increase their sales, and that will go through the take rates in the coming years. Now, I-

[Bhavesh Mistry, CFO at Kingfisher]

And then just on gross margins, so things that may not repeat affects. That obviously was a tailwind in the half, but as currency were exchanged, that can be another tailwind. As I said, Romania, 10 basis points of the 70 basis points in the first half is from our disposal of Romania last year. Then as I flagged, we are seeing a little bit of inflationary pressure, so some price increase requests from suppliers. Obviously, we will push that back. What helped us in the first half is we benefited from some earlier purchasing of inventory last year, which then we sold in the first half. But as we get that inflationary pressure, we will see some of that. But look, confident in what we are doing. Our structural actions you have seen is not just this half but last year, deliberate. Continue to focus on that.

[Bhavesh Mistry, CFO at Kingfisher]

That underpins our discipline on margin and cost as we look ahead.

[Izabel Dobreva, Analyst at Morgan Stanley]

Thank you very much.

[Thierry Garnier, CEO at Kingfisher]

You are welcome.

[Operator]

Thank you. Our next question comes from Mia Strauss with BNP Paribas. Please unmute your line and ask your question.

[Thierry Garnier, CEO at Kingfisher]

Good morning, Mia.

[Mia Strauss, Analyst at BNP Paribas]

Hi, Thierry. Hi, Bhavesh. Thanks for taking my question. I just wanted to maybe ask about sourcing conditions maybe for 2027, and whether you have been doing any pre-buying on the oil derivative. Secondly, just looking at the core performance of B&Q, it is pretty weak. So I just wanted to know what is driving that. Thirdly, just on marketplace, maybe in France and Poland, have you seen any changes in the market post the EU de minimis threshold being removed?

[Thierry Garnier, CEO at Kingfisher]

Let me take the first and the third question. I think Bhavesh will answer on the core U.K. I think sourcing, remember, we have broadly half of our sales is private label, so we have long-term relationship with partners, sometime in Asia. So we are able to really plan with them in advance. So somehow, you can expect to see some of the raw material increases now into 2027, but we are relatively confident that with the strong partnership with us, with those vendors, that would be manageable. Marketplace France, Poland, we are seeing good traffic to our website, good progress in our marketplace. I would not predict if it is coming from the de minimis EU new rules. You probably have access to traffic data to other marketplaces.

[Thierry Garnier, CEO at Kingfisher]

There is some public information here, but we are very happy with the progress of our marketplaces in France and Poland.

[Bhavesh Mistry, CFO at Kingfisher]

I think to your question on core, Mia, when we look at the U.K., core was down 2.7%, a little bit more down in Q1, less in Q2. That is against a backdrop of a market that was also down low single digit. So core was similar against what we saw in terms of the U.K. market. When you look at our banners, two very different models. So B&Q generally serves general builders, more outdoor work. Some of the DIY traffic is also impacted by weather patterns. It was an interesting half, right? Q1, we saw quite a little bit of weakness because of the later start to spring impacting some outdoor projects. Then Q2, you saw a different impact because of heat waves. So there we saw people shifting to online, real concentration of demand and cooling, outdoor and leisure.

[Bhavesh Mistry, CFO at Kingfisher]

It impacted store footfall, people going more online than into stores. When you look at Screwfix, actually, they tend to serve more electricians, plumbers who generally work more indoor, and I think that helped underpin their performance. When you look at trade, TradePoint did well in the half. Again, a function of the nature of trade, the resiliency of trade, and that was pretty positive in B&Q, so we are pleased with that.

[Mia Strauss, Analyst at BNP Paribas]

If I could just follow up on the sourcing conditions, if you could just remind us about your energy and your freight hedging, that would be useful.

[Bhavesh Mistry, CFO at Kingfisher]

Yeah, I can do that. On energy costs, it is a small part of our cost base, and we are pretty well hedged, so fully hedged this year. We tend to hedge on a declining basis to give us more flexibility in the outer years as prices move up and down. We are well hedged this year on energy. Freight, again, we typically sign annual contracts. We have seen a modest increase. All the contracts have. We have a fuel-linked inflation clause, so that drives a little bit of increase. Again, it is a small percentage of our cost of goods.

[Mia Strauss, Analyst at BNP Paribas]

Perfect. Thank you so much.

[Thierry Garnier, CEO at Kingfisher]

You are welcome.

[Operator]

Thank you. As a reminder, if you wish to ask a question, please use the raise hand function at the bottom of your Zoom screen. Our next question comes from Yashraj Rajani with UBS. Please press star six to unmute and ask your question.

[Yashraj Rajani, Analyst at UBS]

Hi. Morning. Thank you so much for taking my question.

[Thierry Garnier, CEO at Kingfisher]

Morning, Yash.

[Yashraj Rajani, Analyst at UBS]

Morning.

[Thierry Garnier, CEO at Kingfisher]

Welcome.

[Yashraj Rajani, Analyst at UBS]

A couple from me, please. Firstly on gross margin, it seems like a couple of your peers have sounded a bit more cautious about inbound freight and also last mile. Can you give us an idea of do those things affect you in the second half and also potentially how your negotiations are going for the next year, maybe? The second question is on Screwfix. It did seem like a lot of that performance is being driven by your initiatives, namely the loyalty program. Given there's no change to the external market condition, is that like-for-like performance a good representation of what you're seeing in Q3 till date as well, or do you think something's changed there? The last one is on franchise stores. Can you please help us on how much that's potentially helped you in the first half?

[Yashraj Rajani, Analyst at UBS]

Or maybe how those economics mature in the second half and into next year as you do that in France with the transfer to franchise stores. Thank you.

[Thierry Garnier, CEO at Kingfisher]

Thank you, Yash. Maybe I start, and Bhavesh will complete on a few points. I think on the first question, we have a store-based model. We are really using store to prep our orders over 90%. We have a high penetration of click and collect. We try to use as much as we can hubs model, whereby we deliver home from our stores. Therefore, yes, there is last mile delivery cost, but that's not necessarily a big consideration for us. Screwfix H1, H2, remember, the peak of Screwfix is now starting September to end of November. That's a season for plumber, electrician, change of time in October. That's a big part of the Screwfix season, and there are heavy preparation every year for peak. We will anniversarize a reward loyalty program early October.

[Thierry Garnier, CEO at Kingfisher]

But I'm very happy and confident in the Screwfix plan this year for peak, with Black Friday and this preparation of the season. I'm relatively optimistic for Screwfix in H2. Last comment on franchise. We, by the way, have announced this morning in France, a third Castorama store franchisee. Would be three for Casto, one for Brico. So far, the economics are very encouraging as expected. We see some are good top line, in line with expectation for Casto, probably above our expectation for Brico. Remember, Brico, it was a former Mr. Bricolage stores becoming a Brico Dépôt stores. We have seen a very significant sales increase. We see overall a better profit by several points between before and after. Very encouraged by this early start. I think franchise in France is very strategic, is not a tactical action.

[Thierry Garnier, CEO at Kingfisher]

That's a way to manage better some store that are difficult stores, especially for Casto. That's as well a way to open new stores quickly with very low or no CapEx involved. We take franchise very seriously. That's several years of action, and I have high expectations for in the future.

[Bhavesh Mistry, CFO at Kingfisher]

Yeah. Not much to add other than the two that we did were loss-making stores. By moving to franchise, that helps our profit margins. I think I'd just caveat that these are two stores, another one today. We're learning as we go. These are the first franchise stores that we are moving into, so encouraged by early results, but lots of learning, testing, trialing that the team are working through.

[Yashraj Rajani, Analyst at UBS]

Super. Thank you so much.

[Thierry Garnier, CEO at Kingfisher]

You're welcome.

[Operator]

Thank you. Our next question comes from Arthur Peel with Berenberg. Please unmute your line and ask your question.

[Thierry Garnier, CEO at Kingfisher]

Good morning, Arthur.

[Arthur Peel, Analyst at Berenberg]

Just a couple from me. Just how to think about the operating cost environment into H2, particularly with the national insurance headwinds sort of annualizing out. Then just secondly on Screwfix France and the phasing of profitability there through the different cohorts and just how that's looking going forward. Thank you.

[Thierry Garnier, CEO at Kingfisher]

Maybe I start with Screwfix, and Bhavesh will come back on cost. You have seen we've given you already in March, and now after H1, the like for like per court. I'm really impressed by the fact we are able to keep even for three to four years old cohorts, the same level of very strong like for like. So that's very encouraging. When you think about the P&L of Screwfix France, we have relatively significant fixed cost. We have established a DC in France. We have established a proper tech system for our Screwfix business in France. We have a small head office. Therefore, we have started this venture with relatively heavy or significant fixed cost. But that's not our focus. Really, the focus is the sales density of the store and the maturation of the store to the point they are breakeven and making profit.

[Thierry Garnier, CEO at Kingfisher]

Because if you reach that point, then you can scale the business massively in the future. So that's really our focus. Really pleased with H1 delivery on like for like, on sales density. And we are on the right trajectory. We find those sales very encouraging for the future.

[Bhavesh Mistry, CFO at Kingfisher]

Arthur, on structural cost reductions is a strong focus in our business and things we will continue to look at in the second half. I'll just remind you, last year, remember we had GBP 145 million of headwinds, national insurance, social taxes, and through our structural actions, we mitigated those and regrouped profit last year. And we continue to look at those structural initiatives across a range of things. As you heard me in my prepared remarks, distribution center space rationalization as we use our stores differently. Operating model changes, whether that's at B&Q or in Casto, store simplification, logistics, procurement. So there's an ongoing engine of structural cost initiatives that we continuously look at, and you can expect us to keep doing that as we look forward.

[Arthur Peel, Analyst at Berenberg]

Thanks, guys.

[Thierry Garnier, CEO at Kingfisher]

You're welcome.

[Operator]

Thank you. Our last question comes from Kate Calvert with Investec. Please unmute your line and ask your question.

[Thierry Garnier, CEO at Kingfisher]

Morning, Kate.

[Kate Calvert, Analyst at Investec]

Morning. Hopefully you can hear me okay.

[Thierry Garnier, CEO at Kingfisher]

Yeah.

[Kate Calvert, Analyst at Investec]

Excellent. Just three for me. First of all, just on Poland, Thierry. You know, we've had plenty of false dawns in the past here. You had a great first half. It feels more like that was self-help driven rather than market driven. Is that a fair assessment? In terms of a second question, I think for Bhavesh, you've talked about the ability to continue taking working capital out. How should we think about the opportunity going forward? I mean, any thoughts on what good might look like? A final question, just on back to Screwfix France, can I try and pin you down on when you think the business might become profitable? I mean, how many stores do you need to cover that fixed cost? Because I assume it's probably more than the stores you've got today.

[Kate Calvert, Analyst at Investec]

That's my three questions. Thank you.

[Thierry Garnier, CEO at Kingfisher]

Thank you, Kate. May I start with the first and the three? I think it's the combination of market and self-help. I think the market has been better in H1. But as well, we gain clearly market share in H1, and that's kitchen and kitchen delivery, strong growth in trade, strong growth in e-commerce, a lot's going on range review. You're right to say I'm very impressed by the innovative spirit of the team. We launched our new loyalty programs a few days ago. A lot of new ideas on design studio in shopping mall. Lots going on to create quickly e-commerce hub across Poland. A lot going on now. My view is, if you think medium-term, Poland is a good country to be in. It's strong GDP, one of the strongest or maybe the strongest in Europe. We expect that to continue.

[Thierry Garnier, CEO at Kingfisher]

We are number one in this country. We have really strong foundation. We can open more stores. There are more to go after on trade. Somehow we feel the big box model for trade in Poland is very relevant, and there is more space to grow on trade. Allegro is super strong, but we could be a number two clearly on online business. A lot's going on in Poland. It's true that it's a country where the changes can be relatively violent, and that will stay the same. But if you think around the medium-term trajectory, it makes me very optimistic. Screwfix France quickly, the fixed cost is not really our key consideration for now. That's all around sales per stores.

[Thierry Garnier, CEO at Kingfisher]

We are really looking very much at the first two, three cohorts because you want to reach breakeven and having store sales density and profit in the right place before scaling up meaningfully. We are, I think, in a good trajectory. I'm really encouraged by like for like the cohort one at +39, and then cohort two at +39 as well. That's very strong after four years. We are expecting a reasonable number of stores reaching breakeven and then profitability. When we'll be there, we'll press a button to have a more significant expansion.

[Thierry Garnier, CEO at Kingfisher]

I think we need to be a bit patient looking at the improvement at Screwfix, but up to now, I must say the trajectory is really good, and we are very encouraged by seeing those very old cohorts now, because some of those store opened in Q4 2022 keep growing 40%. Very encouraging. But we consider we need to be patient, because if we start the expansion, it's to open 600 store broadly. So, before going there, we need to be absolutely sure that the Screwfix is in the right place. Now moving to

[Bhavesh Mistry, CFO at Kingfisher]

Let me just add to Thierry's points on Screwfix France. I think, as you said, we're seeing encouraging performance across all our cohorts on top line growth. The best stores do give us confidence. We are not solving for store count, we're solving for economics. We're looking to prioritize proof over pace, repeatable, profitable economics. We're encouraged by what we're seeing in our best stores. We'll continue to progress in a disciplined way. It's not store count only that we solve for.

[Bhavesh Mistry, CFO at Kingfisher]

On working capital, yes, look, well controlled in H1. A lot still to go after. You've heard me talk previously around inventory. We're far from best in class in inventory, so for us it's looking at structural actions, not tactical actions. You've heard me talk about some examples in my prepared remarks. If you look over the last three years, we've taken about nine days of stock out. We'll continue to focus on that, whilst being mindful of sales and the impact that stock reduction has on sales. Payment terms, another area of focus by the banner. I would say that it's an area that we look at closely, and you'll expect us to continue to look at working capital as we look forward.

[Kate Calvert, Analyst at Investec]

Thanks very much.

[Operator]

Thank you. There are no further questions. I'll now hand over to management for closing remarks.

[Thierry Garnier, CEO at Kingfisher]

Thank you. First of all, thank you for being with us. Thank you for all your questions, and it is always a pleasure to discuss. I would say I am very proud of the job done by the team during this H1. We are pressing ahead at pace with our strategic delivery. We speak about e-commerce, trade, marketplace, retail media, Screwfix France. At the same time, we have been very disciplined on managing gross margin cost and cash flow efficiently. I think I am very proud of the job done by the team. We are building a stronger, more resilient company, by pushing and pressing on those strategic priorities, and that makes me very confident. Thank you everyone, and talk to you soon. Bye-bye.

[Operator]

Thank you for joining today's call. You may now disconnect. Have a nice day.

Participants

Executives

• Thierry Garnier, CEO
• Bhavesh Mistry, CFO

Analysts

• Richard Chamberlain, Analyst at RBC
• Tim Ramskill, Analyst at Bank of America
• Izabel Dobreva, Analyst at Morgan Stanley
• Mia Strauss, Analyst at BNP Paribas
• Yashraj Rajani, Analyst at UBS
• Arthur Peel, Analyst at Berenberg
• Kate Calvert, Analyst at Investec