Kingfisher H1 Earnings Call Highlights

Key Points

• Kingfisher raised its full-year outlook after adjusted first-half pre-tax profit rose 9.9% to £404 million, supported by gross-margin gains and £44 million in structural cost savings. Full-year profit guidance increased to £595 million–£635 million, while free-cash-flow guidance rose to £480 million–£520 million.
• Trade and digital operations continued to outperform: trade sales rose 16% excluding Screwfix, e-commerce sales increased 16%, and marketplace GMV jumped 42%, contributing more than £13 million in retail profit. Screwfix led U.K. performance with 5.6% like-for-like sales growth.
• Performance remained mixed across markets, with stronger results in Poland and Iberia offsetting pressure at B&Q, Brico Dépôt and bathroom categories. Kingfisher is responding with store transformations, new lower-priced bathroom ranges and continued investment in marketplace and trade capabilities.

Kingfisher LON: KGF reported higher first-half profit and upgraded its full-year outlook, citing gross-margin gains, cost discipline and continued growth in trade, e-commerce and marketplace operations despite mixed conditions across its home-improvement markets.

Adjusted pre-tax profit rose 9.9% to £404 million in the first half, while sales including marketplace gross merchandise sales increased 1.6%. Adjusted earnings per share increased 16%, and free cash flow totaled £339 million after investment in strategic priorities, Chief Financial Officer Bhavesh Mistry said.

The company raised its full-year adjusted pre-tax profit guidance to £595 million to £635 million, an increase of £20 million at the midpoint. It also lifted expected free cash flow by £20 million to a range of £480 million to £520 million.

Chief Executive Officer Thierry Garnier said the company’s strategy was gaining momentum, particularly at Screwfix and in its trade, digital and marketplace businesses. “We are building a stronger, more resilient Kingfisher,” Garnier said.

Margins and cash generation support profit growth

Mistry said gross-margin performance and structural cost reductions more than offset £48 million of operating-cost inflation, including two months of higher U.K. national insurance contributions. Gross margin contributed £40 million in the period, supported by group buying and sourcing, marketplace and retail-media growth, foreign-exchange tailwinds and the prior-year disposal of the Romania business.

The company delivered £44 million of structural cost reductions through distribution-center space optimization, procurement efficiencies and store operating-model improvements. Mistry said Kingfisher continued to see opportunities from sourcing, marketplace, retail media, supply-chain optimization and productivity measures across stores and central functions.

Kingfisher returned £333 million to shareholders through dividends and share buybacks during the half. It declared an interim dividend of 3.8 pence per share, unchanged from a year earlier, and said it expects to complete £175 million of its £300 million share-buyback program by the end of December.

Net leverage stood at 1.4 times, while adjusted EBITDA was £784 million. The company spent £171 million on capital expenditures, including nine new stores, technology and product ranges.

Trade and digital channels gain share

Group trade sales reached £2.1 billion and increased 16% excluding Screwfix. Trade penetration rose by more than 3 percentage points to 31% of sales. Kingfisher said it had trade zones in 49% of stores outside Screwfix and had enrolled 438 trade sales partners across its banners.

Garnier said the company could eventually have one or two trade sales partners in every store, while also seeking to raise sales generated by each partner through training, incentives and customer-management tools.

E-commerce sales reached £1.6 billion and rose 16% excluding Screwfix, with digital penetration increasing to 22% of group sales. Marketplace gross merchandise value rose 42%, accounted for 18% of e-commerce sales and contributed more than £13 million of retail profit. Retail-media revenue increased 75%.

At B&Q, the marketplace now carries nearly 5 million stock-keeping units. Garnier said the business had onboarded more than 80 international merchants, though they represented less than 10% of marketplace GMV. He said the company sees potential to expand cross-border marketplace activity and offer more services to sellers.

Screwfix leads U.K. performance

Screwfix reported like-for-like sales growth of 5.6%, driven by volumes and its Rewards loyalty program. The program had more than 2.3 million active customers less than a year after launch and accounted for 44% of Screwfix sales, according to Kingfisher.

Screwfix also expanded its broader vendor-to-store offering. A partnership with footwear supplier Footshore generated £12 million in sales in its first year, with 70% of orders collected in stores, Garnier said.

U.K. and Ireland retail profit increased 4.9% to £361 million, including a £14 million business-rates refund. Mistry said B&Q’s core sales declined 2.7% in a U.K. market that was also down by low single digits. He attributed some pressure to a late start to spring and summer heat waves, which affected certain outdoor projects and store footfall while shifting demand online.

Core sales growth across the group was led by repair and maintenance categories including tools, hardware, joinery and electrical. Seasonal sales grew, with strong demand for cooling and outdoor leisure products partly offset by weaker demand for plants, outdoor paint and fencing. Big-ticket kitchen sales outperformed markets in the U.K. and Poland, while bathroom demand remained challenging and Kingfisher said its bathroom ranges underperformed.

The company has started a bathroom range review, beginning with new furniture range Imandra 2. Garnier said the new ranges would offer updated colors and designs at lower prices, with rollout beginning in France before expanding to other markets.

France, Poland and Iberia results

France retail profit increased to £74 million and retail margin rose 10 basis points. Castorama France returned to like-for-like growth in the second quarter, with like-for-like sales including marketplace GMV up 0.4%. Brico Dépôt’s like-for-like sales fell 4.2%, reflecting weaker demand for building materials and larger projects during heat waves, as well as temporary disruption following the launch of a new website.

Kingfisher said its Castorama transformation included work on 24 stores, with nine more planned for the second half. Right-sized stores delivered double-digit improvements in sales density, while revamped stores generated profit contributions above the estate average. The company also announced the transfer of a third Castorama store to a franchise model.

In Poland, total sales rose 3.6% and like-for-like sales increased 2.2%, while retail profit rose 15.7% to £60 million. Trade sales grew 14%, e-commerce sales rose 39%, and the marketplace reached breakeven. Garnier said the company expects Polish profit margins to improve over coming years, though he did not expect a return to pre-COVID levels above 10%.

Iberia posted like-for-like sales growth of 7.7% and retail profit growth of 17% to £13 million. Screwfix France saw store like-for-like sales rise 48%, with the company planning three additional openings in the second half to reach 37 stores. Management said it remained focused on proving repeatable store-level economics before accelerating expansion.

About Kingfisher (LON:KGF)

Kingfisher plc 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.

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