REG - Kingfisher PLC - Q1 Trading Update

KingfisherAnnouncement

24/05/2023 07:00

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RNS Number : 4063A  Kingfisher PLC  24 May 2023

Q1 trading update to 30 April 2023

 

Resilient performance in core and 'big-ticket' categories;

full year guidance unchanged

 

24 May 2023: Kingfisher plc ('Company', 'Group' or 'Kingfisher') is today
providing its Q1 23/24 sales.

 

Key points

·    First quarter sales of £3.3bn; total sales +0.8% (reported) and
-2.0% (constant currency)

·    LFL -3.3% including a -0.5% calendar impact((1) )

·    Resilient performance in core and 'big-ticket' categories((2)) (82%
of sales), with LFL -1.3%

·    Sales of seasonal categories((3)) (18% of sales) affected by weather
conditions, with LFL -11.3%

·    Improved trading since early April; continued resilience in core and
'big-ticket' trading and better seasonal sales

·    Q1 by region:

o UK & Ireland: good performance at B&Q given impact of weather on
seasonal sales; strong market share gains and positive LFL at Screwfix with
trade customers continuing to see strong pipelines

o France: resilient performance in core and 'big-ticket'; both banners
impacted by weather and 10 days of national pension reform strikes

o Poland: year-on-year performance impacted by strong comparative; performance
vs pre-pandemic levels consistent with Q4 22/23

·    Opened two Screwfix stores in France (both in May); targeting up to
85 new stores across the UK, Ireland and France in FY 23/24

·    Total e-commerce sales growth of +4.7%, representing 16.9% of Group
sales (Q1 22/23: 15.9%; Q1 19/20: 7.2%). Continued strong growth of B&Q
marketplace, reaching 27% of B&Q's e-commerce sales in April 2023

·    Full year guidance reiterated; remain comfortable with consensus of
sell-side analyst expectations for FY 23/24 adjusted PBT of £634m((4))

 

Unaudited Q1 23/24 sales (three months ended 30 April 2023)

 

                      Sales     % Total   % Total            % LFL

                      2023/24   Change    Change             Change(()(5)())
                      £m        Reported  Constant currency  Constant currency
 UK & Ireland         1,590     +1.4%     +1.3%              (0.8)%
 - B&Q                980       (1.5)%    (1.7)%             (1.6)%
 - Screwfix           610       +6.6%     +6.5%              +0.7%
 France               1,116     +1.2%     (4.1)%             (4.1)%
 - Castorama          578       +2.3%     (3.1)%             (3.1)%
 - Brico Dépôt        538       -         (5.2)%             (5.2)%
 Other International  565       (1.9)%    (6.5)%             (8.1)%
 - Poland             409       (3.3)%    (7.7)%             (10.3)%
 - Iberia((6))        94        +8.1%     +2.5%              +2.5%
 - Romania            59        (5.7)%    (11.1)%            (7.8)%
 - Other((7))         3         n/a       n/a                n/a
 Total Group          3,271     +0.8%     (2.0)%             (3.3)%

 

 

Thierry Garnier, Chief Executive Officer, said:

 

"As we move through our key trading season, we are pleased to see that sales
in our core and 'big-ticket' categories, which make up over 80% of our total
sales, are showing continued resilience. The unusually poor spring weather in
the UK and France affected our seasonal sales in the quarter, impacting demand
for items such as garden and outdoor products. We have however seen an
improvement in trading since early April, and anticipate a release of some
pent-up demand as the weather continues to improve. Our inventory remains
healthy and, in aggregate, is reducing in line with our expectations.

 

"We continue to execute our strategy at pace, making good progress across all
our key priorities. Screwfix is trading well and seeing particularly strong
demand from trade customers, with total sales up 6.5%. The business continues
to drive its store expansion plans in the UK, Ireland and France. E-commerce
sales were another highlight in the quarter, up 4.7%. One of the drivers of
this is the continued success of B&Q's marketplace, which reached 27% of
B&Q's online sales in April, a year after its launch.

 

"Across the Group, we are maintaining a sharp focus on competitive pricing,
while balancing inflationary pressures. With the continued easing of raw
material prices and freight costs, we expect to see lower product cost
inflation in H2.

 

"We are comfortable with market expectations for the business this year, and
confident in delivering growth ahead of our markets, strong cash generation,
and higher returns to shareholders over the medium-term."

 

Current trading and outlook

Trading trends since early April have seen an improvement in seasonal sales as
well as continued resilience in our core and 'big-ticket' categories. For the
three weeks to 20 May 2023((8)) LFL sales were -1.0%, including a -0.4% impact
from the additional UK coronation public holiday. We see resilience across our
customer segments (DIY and DIFM/trade) with ongoing strength from the trade
segment.

 

We remain well positioned to navigate FY 23/24 against the current backdrop of
heightened macroeconomic uncertainty. We are delivering value to our customers
at all price points, whilst also managing inflationary pressures effectively.
We are confident in our diverse and resilient business model, and our priority
remains consistent execution against our strategy to drive top line and market
share growth. Furthermore, we remain committed to active and responsive
management of our operating costs, and are on track with our plans to reduce
inventory levels this year.

 

We are comfortable with the consensus of sell-side analyst expectations for FY
23/24 adjusted PBT of £634m((4)), and for H1 we expect to report an adjusted
PBT of c.£350m.

 

We remain highly cash generative and expect >£500m free cash flow for the
year, supported by the unwind of working capital outflows in the prior year.
And as stated in our FY 22/23 results in March, we intend to announce a new
share buyback programme following completion of the existing programme this
year, subject to our capital allocation framework and market conditions. As of
22 May 2023, c.£205m of the current £300m share buyback programme had been
completed.

 

Q1 summary

 

Progression by month

As stated in our FY 22/23 results in March, the first quarter of the new
financial year started with good underlying sales trends. February 23/24 total
sales were +1.9% (LFL sales +0.5%).

 

March was impacted by weather conditions in the UK and France, together with a
strong comparative in Poland. Compounding this, we saw several days of
national pension reform strikes in France which impacted traffic into certain
Castorama and Brico Dépôt stores.

 

Trading improved in April, supported by our core and 'big-ticket' categories
with ongoing strength in trade demand.

 

Overall, Q1 23/24 LFL sales were down 3.3%, including a -0.5% calendar impact.
On a 4-year LFL sales basis((9)), this represents growth of +12.4%. As a
reminder, Q4 22/23 3-year LFL was +13.7%.

 

                                    % LFL Change
                   Feb 2023  Mar 2023  Apr 2023  Q1 23/24  Q2 23/24

                                       (to date)((8))
 Group LFL                          +0.5%     (6.9)%    (2.5)%    (3.3)%    (1.0)%
 Includes calendar impact((1)) of:  +0.2%     +0.6%     (2.0)%    (0.5)%    (0.4)%

 

LFL sales by core and 'big-ticket' vs seasonal

 

                      % LFL Change
            Core and 'big-ticket'  Seasonal  Q1 23/24
 UK & Ireland         +1.7%                  (12.2)%   (0.8)%
 -B&Q                +2.1%                  (13.7)%   (1.6)%
 -Screwfix           +1.1%                  (4.0)%    +0.7%
 France               (1.7)%                 (12.9)%   (4.1)%
 -Castorama          (1.2)%                 (9.3)%    (3.1)%
 -Brico Dépôt        (2.2)%                 (17.5)%   (5.2)%
 Other International  (8.8)%                 (5.3)%    (8.1)%
 -Poland             (10.5)%                (9.6)%    (10.3)%
 -Iberia             (0.1)%                 +19.4%    +2.5%
 -Romania            (9.9)%                 (1.2)%    (7.8)%
 Group LFL            (1.3)%                 (11.3)%   (3.3)%
 Proportion of sales  82%                    18%

 

Q1 trading highlights

All commentary below is in constant currency.

 

UK & IRELAND

Total sales +1.3% (LFL -0.8%), with seasonal categories impacted by unusually
poor spring weather, especially in March.

 

·    B&Q sales -1.7%. LFL -1.6%, reflecting a good performance given
the impact of weather on seasonal sales. LFL sales of core and 'big-ticket'
categories were +2.1% with bathroom & storage sales performing well in the
quarter. B&Q's surfaces & décor, electricals, plumbing, heating &
cooling (EPHC) and tools & hardware categories also saw good year-on-year
(YoY) growth. LFL sales of seasonal categories were -13.7%, impacted by the
weather in March. B&Q's total e-commerce sales increased +14.3% YoY in Q1,
with an overall e-commerce sales penetration of 11.4% (Q1 22/23: 10.0%).
B&Q's e-commerce marketplace, which has scaled rapidly since its launch in
March 2022, continues to see strong growth and reached a participation of 27%
in April (i.e., B&Q's marketplace gross sales divided by B&Q's total
e-commerce sales). B&Q opened one new store in Q1 (a small retail park
compact format in Newark) and closed all eight of its 'grocery concession'
format stores. TradePoint, B&Q's trade-focused banner, saw a robust
performance in the quarter with LFL sales -1.6% and a penetration of B&Q's
total sales of 21% (Q1 22/23: 21%). The banner continues to focus on building
customer engagement and loyalty, trade-only deals and events, and improving
trade-specific product ranges and services.

·    Screwfix sales +6.5%. LFL +0.7%, with demand from trade customers
driving strong market share gains in Q1. The business saw good YoY growth
across most categories, apart from outdoor, with particularly good momentum in
its building & joinery, kitchen and bathroom categories. Screwfix opened
three new stores in the UK & Ireland and remains on track to open up to 60
new stores in these countries this financial year. Note that total sales for
Screwfix UK & Ireland include sales (not material) arising from the
acquisition on 20 March 2023 of the assets of Connect Distribution Services.
The results of Screwfix France are recorded within the 'Other International'
division - see below for further information.

 

FRANCE

Total sales -4.1% (LFL -4.1%). As in the UK & Ireland, trading in France
was impacted by the weather, especially in March. Furthermore, 10 days of
national pension reform strikes across the quarter impacted customer footfall
to both banners.

 

·    Castorama sales -3.1%. LFL -3.1%, with resilient underlying sales
from both DIY and DIFM/trade customers. Sales from the building & joinery
and EPHC categories were robust, with the latter seeing good growth in energy
and water-saving products. LFL sales of seasonal categories were -9.3%, while
LFL sales of core and 'big-ticket' categories were -1.2%.

·    Brico Dépôt sales -5.2%. LFL -5.2%, with several store locations
directly impacted by strike action in the quarter (e.g., due to nearby road
closures). 'Big-ticket' sales were resilient, with growth in the bathroom
& storage category. Overall core and 'big-ticket' LFL sales were -2.2%.
Seasonal categories were -17.5% LFL, with the weather affecting the important
garden structure and outdoor paint ranges. Brico Dépôt continues to
strengthen its discounter credentials through further differentiating its
ranges and maintaining a strong price index relative to its home improvement
peers.

 

OTHER INTERNATIONAL

·    Poland sales -7.7%. LFL -10.3% against strong comparatives from the
prior year (Q1 22/23 LFL +54.5%). Market growth in Poland has been impacted
since Q4 22/23 by ongoing macroeconomic challenges in the country, including
the impact on the consumer of high inflation and interest rates. Looking at
Castorama's performance on a 4-year LFL sales basis((9)), growth was +10.1% -
a slight improvement on its Q4 22/23 3-year LFL of +9.4%. LFL sales of core
and 'big-ticket' categories were -10.5% and LFL sales of seasonal categories
were -9.6%. We opened one new medium-box store in Q1 and remain on track to
open six more Castorama stores this financial year.

·    Iberia sales +2.5%. LFL +2.5%, supported by strong growth in seasonal
categories, especially in outdoor and EPHC given more favourable weather
conditions. The business also saw good performances in its building &
joinery and kitchen categories.

·    Romania sales -11.1%. LFL -7.8% against a strong comparative from the
prior year (Q1 22/23 LFL +13.9%). The business saw a strong performance in its
kitchen category.

·    Other consists of the consolidated results of Screwfix International,
NeedHelp and franchise agreements. While these businesses are in their early
investment phase, we are pleased with their performance to date. There are now
seven Screwfix stores in operation in France, with two new openings this
financial year to date. We remain on track to open up to 25 stores this
financial year. The business continues to invest in its operations and brand
awareness, and is seeing an encouraging progression in sales and customer
trends.

·    In Turkey, Kingfisher's 50% joint venture, Koçtaş traded well
against a challenging macroeconomic backdrop. The business launched a new
e-commerce marketplace in the quarter and opened 24 new stores. As a joint
venture, Koçtaş is not included in our reported sales or Group LFL.

 

 

Footnotes

((1)) Calendar impact represents the impact of the annual calendar shift on
LFL sales growth due to different days of the week falling into or out of the
current period compared to the prior period. For example, historically, higher
trading is seen on a Friday and Saturday as compared to a Sunday.

((2)) Core and 'big-ticket' category sales represent 82% of Group sales in Q1.
It includes the sales from non-seasonal products across all our categories,
including 'big ticket' sales (i.e., kitchen, bathroom & storage).

((3)) Seasonal category sales represent 18% of Group sales in Q1. It includes
the sales from certain products within our outdoor, electricals, plumbing,
heating & cooling (EPHC) and surfaces & décor categories.

((4)) Guidance assumes current exchange rates. According to Company-compiled
consensus estimates as of 24 April 2023, the consensus of sell-side analyst
expectations for FY 23/24 adjusted pre-tax profit is £634m (previously £633m
as of 14 March 2023).

((5)) 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.

((6)) Brico Dépôt Spain and Portugal.

((7)) 'Other' consists of the consolidated results of Screwfix International,
NeedHelp, and revenue from franchise agreements.

((8)) 'Q2 23/24 LFL sales (to 20 May 2023)' represents the period from 30
April 2023 to 20 May 2023 compared against the equivalent period in the prior
year (i.e., 1 May 2022 to 21 May 2022). The figures are provisional and
exclude certain non-cash accounting adjustments relating to revenue
recognition. The Group LFL number includes a -0.4% impact from the additional
coronation public holiday in the UK on 8 May 2023, which is not a pure
"calendar impact" as defined in footnote 1 above.

((9)) 4-year LFL is calculated by compounding the current and prior three
periods' LFL growth. For example, Q1 23/24 LFL growth of +5%, Q1 22/23 LFL
growth of +4%, Q1 21/22 LFL growth of +3%, and Q1 20/21 LFL growth of +2%,
results in 4-year LFL growth of +14.7%. Russia (sale completed on 30 September
2020) is excluded from the Group 4-year LFL calculation.

 

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

 

Q1 trading update and data tables

This announcement and data tables for Q1 23/24 sales can be downloaded from
www.kingfisher.com/investors.

 

We can be followed on Twitter (@kingfisherplc) with the Q1 results tag
#KingfisherResults.

 

Half year 23/24 results

Our next scheduled results announcement will be our results for the six months
ending 31 July 2023, on 19 September 2023.

 

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.

 

About Kingfisher plc

Kingfisher plc is an international home improvement company with approximately
1,570 stores, supported by a team of over 80,000 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. At Kingfisher, our purpose
is to help make better homes accessible for everyone.

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
30 April 2023. 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 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 (including but not limited to
the COVID pandemic), 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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