REG - Kingfisher PLC - Q3 Trading Update

KingfisherAnnouncement

24/11/2022 07:01

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RNS Number : 4099H  Kingfisher PLC  24 November 2022

Q3 trading update to 31 October 2022

 

Resilient sales trends continue; Q3 total sales growth +1.7%

3-year LFL +15.3%

 

24 November 2022: Kingfisher plc ('Company', 'Group' or 'Kingfisher') is today
providing its Q3 22/23 sales.

 

Key points

·    Third quarter sales of £3.3bn; total sales +1.7% in constant
currency and LFL +0.2%

·    Sales significantly ahead of pre-pandemic performance (3-year LFL
+15.3%), supported by continued market share gains

·    Good start to trading in the fourth quarter with 3-year LFL +16.2%
and LFL +2.8% for the three weeks to 19 November 2022

·    Strong energy efficiency product demand supporting DIY sales

·    Trade customers continuing to see robust pipelines; strong TradePoint
performance (LFL +1.9% and 3-year LFL +29.5%), and Screwfix gaining
significant market share in the UK

·    Opened first two Screwfix stores in France; meaningful step-up in
store roll-outs planned for 2023

·    Strong omni-channel engagement with e-commerce sales 3-year growth of
+138% (YoY growth of +2.3%); representing 16% of Group sales (Q3 19/20: 8%).
Continued growth of B&Q marketplace in Q3, and successful marketplace
launches in Spain and Portugal

·    Continuing to deliver value to customers whilst managing inflation
pressures effectively

·    Good product availability and effective supply chain management

·    Anticipate FY 22/23 adjusted pre-tax profit in the range of c.£730m
to £760m((1))

 

Unaudited Q3 22/23 sales (three months ended 31 October 2022)

 

                      Sales     % Total   % Total            % LFL              % 3-year LFL

                      2022/23   Change    Change             Change(()(2)())    Change(()(3)())
                      £m        Reported  Constant currency  Constant currency  Constant currency
 UK & Ireland         1,545     +0.1%     +0.1%              (2.3)%             +12.9%
 - B&Q                935       (2.8)%    (2.7)%             (3.5)%             +13.1%
 - Screwfix           610       +4.8%     +4.9%              (0.5)%             +12.4%
 France               1,097     (1.2)%    +0.6%              +0.5%              +14.6%
 - Castorama          564       (0.9)%    +0.8%              +0.8%              +16.6%
 - Brico Dépôt        533       (1.5)%    +0.2%              +0.2%              +12.7%
 Other International  621       +5.1%     +8.4%              +6.7%              +23.1%
 - Poland             447       +6.6%     +10.5%             +7.6%              +21.3%
 - Iberia(()(4)())    91        +1.6%     +3.4%              +3.4%              +19.8%
 - Romania            80        +2.3%     +4.2%              +4.2%              +34.6%
 - Other(()(5)())     3         n/a       n/a                n/a                n/a
 Total Group          3,263     +0.6%     +1.7%              +0.2%              +15.3%

 

Thierry Garnier, Chief Executive Officer, said:

 

"Our sales trends continued to be resilient, with like-for-like sales 15.3%
ahead of pre-pandemic levels in the quarter. This was supported by continued
market share growth, including strong gains at Screwfix, TradePoint and
Castorama Poland. While the market backdrop remains challenging, DIY sales
continue to be supported by new industry trends such as more working from home
and a clear step-up in customer investment in energy saving and efficiency.
DIFM and trade activity also continues to be well supported by robust
pipelines for home improvement work.

 

"Competitive pricing remains a priority. With our customers facing rising
living costs, we are determined to make home improvement affordable and
accessible - particularly through our own exclusive brands which represent 45%
of our sales.

 

"We continue to execute our strategy at pace, and to invest for growth. Last
month marked a key moment in our history with the opening of our first
Screwfix store in France, with a total of four to five stores due to open this
financial year and many more planned for 2023. We launched our e-commerce
marketplace in Spain and Portugal, building upon the early success of
B&Q's marketplace in the UK. We have also launched energy-saving tools in
the UK and France, to help customers diagnose and access products and services
to increase the efficiency of their homes ahead of the winter. We have seen a
very positive take-up of these services so far, with B&Q, for example,
taking nearly 1,000 appointment bookings within the first three days of
launch.

 

"While we continue to be vigilant against macroeconomic uncertainty, we remain
confident in both the resilience of our industry and in continuing to grow
ahead of our markets."

 

Current trading and outlook

The fourth quarter has started well, with good trading momentum. For the three
weeks to 19 November 2022((6)) LFL sales were +2.8% and +16.2% on a 3-year
basis. Sales remain resilient across our customer segments (DIY and
DIFM/trade) and banners, with ongoing strength in energy efficiency product
sales and demand from the trade segment.

 

Looking ahead, we remain mindful of the current backdrop of heightened
macroeconomic uncertainty. We continue to focus on offering customers value 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 costs, and are on track with our plans to sell through a
large part of the 'buffer' stock held as of 31 July 2022.

 

Regarding our profit guidance for this year, we anticipate FY 22/23 adjusted
pre-tax profit to be in the range of c.£730m to £760m((1)). This includes
additional P&L investments to strengthen our Screwfix France store opening
plan, additional wage support for colleagues, and slightly higher energy
costs. Additional financial guidance for FY 22/23 is provided on page 4 of
this announcement.

 

Q3 trading highlights

All commentary below is in constant currency.

 

UK & IRELAND

Total sales +0.1% (LFL -2.3%; 3-year LFL +12.9%), with trading in Q3 adversely
impacted by the abnormally warmer weather in October. Store closures across
the UK in relation to Her Majesty's funeral impacted UK & Ireland LFL
sales in Q3 by -0.6%.

 

·    B&Q sales -2.7%. LFL -3.5% (3-year LFL +13.1%), with sales in
line with expectations across all categories. In particular, building &
joinery continues to see strong momentum, with a positive LFL supported by
demand from trade customers and from high demand of insulation. Showroom sales
performed well in the quarter, with resilient demand in the bathroom &
storage category. Whilst outdoor sales were down YoY given a strong
comparative from the prior year's clearance activity, sales remain strong
versus pre-pandemic levels. Overall, LFL sales of weather-related categories
were -11.5% (+14.6% on a 3-year LFL basis). LFL sales of non-weather-related
categories were -1.9% (+11.6% on a 3-year LFL basis). B&Q's total
e-commerce sales moved into positive YoY growth in Q3, driven by its
marketplace proposition which continues to see strong growth since its launch
in March. Marketplace reached a penetration of 13% in October (i.e., B&Q's
marketplace gross sales divided by B&Q's total e-commerce sales).
TradePoint, B&Q's trade-focused banner, continued to outperform with LFL
sales +1.9% and 3-year LFL sales +29.5%. TradePoint sales were 23% of B&Q
sales (Q3 21/22: 22%).

·    Screwfix sales +4.9%. LFL -0.5% (3-year LFL +12.4%), with demand from
trade customers supporting a strong YoY performance in the building &
joinery and bathroom & storage categories. The business saw resilient
sales from its tools & hardware and EPHC (electricals, plumbing, heating
& cooling) categories. Screwfix opened 17 new stores in Q3 in the UK and
Republic of Ireland, with 48 new stores opened in the year to date, and
remains on track to open 80 new stores in these countries during this
financial year. In addition, Screwfix opened its first two stores in France
(in October and November respectively), with a total of four to five openings
planned for this financial year. Note that the results of Screwfix France are
recorded within the 'Other International' division.

 

FRANCE

Total sales +0.6% (LFL +0.5%; 3-year LFL +14.6%). The home improvement
industry in France was adversely impacted by abnormally warmer weather in
October, as well as strikes across petrol stations in France affecting
customer footfall.

 

·    Castorama sales +0.8%. LFL +0.8% (3-year LFL +16.6%), reflecting
resilient sales from both DIY and DIFM/trade customers. Most categories saw
good 3-year growth, with sales from the building & joinery and EPHC
categories particularly strong YoY, and with the latter seeing robust growth
in heating products and more energy-efficient solutions. LFL sales of
weather-related categories were +2.9% (+30.8% on a 3-year LFL basis). LFL
sales of non-weather-related categories were flat (+13.2% on a 3-year LFL
basis).

·    Brico Dépôt sales +0.2%. LFL +0.2% (3-year LFL +12.7%), reflecting
resilient sales and YoY growth from most categories. The business achieved
strong YoY and 3-year growth across EPHC and building & joinery through an
impressive performance in insulation sales. Brico Dépôt continues to drive
increased customer engagement and improved price perception, as the business
focuses on further strengthening its discounter credentials and
differentiating its ranges.

 

OTHER INTERNATIONAL

·    Poland sales +10.5%. LFL +7.6% (3-year LFL +21.3%), supported by
strong market share gains. Positive LFL and strong 3-year performance across
all categories, with exceptional growth in the kitchen category supported by
the development of our new ranges and customer journey. LFL sales of
weather-related categories were +21.7% (+45.3% on a 3-year LFL basis). LFL
sales of non-weather-related categories were +5.2% (+17.7% on a 3-year LFL
basis). A further two new stores opened in Poland in Q3, with five new stores
opened in the year to date.

·    Iberia sales +3.4%. LFL +3.4% (3-year LFL +19.8%), supported by
strong growth in seasonal categories, especially in outdoor and EPHC given the
extended heatwave across August. Good 3-year performance in the building &
joinery, outdoor and EPHC categories.

·    Romania sales +4.2%. LFL +4.2% (3-year LFL +34.6%), reflecting robust
sales across most categories with notable strength in kitchens and surfaces
& décor.

 

FY 2022/23 Technical guidance

New guidance, or significant updates to our previous guidance, are noted below
in italics. Please refer to page 6 for further details regarding
forward-looking statements.

 

Income statement:

·    Space

-    Net space growth to impact total sales by c.+1.5%, largely from
Screwfix and Poland

·    Gross margin %

-    In line with pre-pandemic level (FY 19/20: 37.0%)

·    New businesses

-    'Other' retail losses of c.£35m (FY 21/22: £10m) (previous guidance
c.£30m, with increase driven by additional investment in Screwfix France).
'Other' consists of the consolidated results of Screwfix International,
NeedHelp, and franchise agreements, recorded within the 'Other International'
division

-    Retail loss of c.£5m in relation to investment in B&Q's
e-commerce marketplace, recorded within the results of B&Q in the 'UK
& Ireland' division

·    Central costs

-    Broadly flat YoY (FY 21/22: £60m)

·    Net finance costs

-    Decrease by c.£20m mainly as a result of lower interest expense on
lease liabilities (FY 21/22: £137m)

·    Adjusted pre-tax profit

-    Full year adjusted pre-tax profit in the range of c.£730m to
£760m((1)) (previously c.£770m, with trading scenarios for the balance of H2
providing a potential range of outcomes of c.£730m to £770m)

·    Tax rate

-    Group adjusted effective tax rate of c.22%((7)) (FY 21/22: 22%)

 

Balance sheet and cash flow:

·    Inventory - anticipate reduction of stock levels in H2 22/23 related
to sell-through of a large part of 'buffer' stock previously held to protect
product availability

·    Capital expenditure - targeting gross capex of c.3.5% of total sales
(FY 21/22: £397m; c.3.0% of total sales)

·    Tax - in February 2022, a payment of €40m (c.£34m) was made to the
French tax authorities with regards to a historic tax liability. The amount
was fully provided for in prior periods

·    Share buybacks - c.£315m outflow for share buybacks (c.£145m for
the first £300m programme completed in April, and a further c.£170m related
to the second £300m programme) (previous guidance c.£325m outflow)

·    Dividends - £246m outflow for dividends (£172m related to the FY
21/22 final dividend of 8.60p, and £74m related to the FY 22/23 interim
dividend of 3.80p). For the total dividend in respect of FY 22/23, our
dividend policy target cover range remains 2.25 to 2.75 times, based on
adjusted basic earnings per share

Footnotes

((1)) Guidance assumes current exchange rates.

((2)) 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.
Stores temporarily closed or otherwise impacted due to COVID are also
included.

((3)) 3-year LFL is calculated by compounding the current and prior two
periods' LFL growth. For example, Q3 22/23 LFL growth of 5%, Q3 21/22 LFL
growth of 4%, and Q3 20/21 LFL growth of 3%, results in 3-year LFL growth of
12.5%. Russia (sale completed on 30 September 2020) is excluded from Group and
Other International 3-year LFL calculations.

((4)) Brico Dépôt Spain and Portugal.

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

((6)) 'Q4 22/23 LFL sales (to 19 November 2022)' represents the period from 30
October 2022 to 19 November 2022 compared against the equivalent period in the
prior year (i.e., 31 October 2021 to 20 November 2021). The corresponding
3-year LFL represents the period 30 October 2022 to 19 November 2022 compared
against the equivalent period in FY 19/20 (i.e., 3 November 2019 to 23
November 2019). The figures are provisional and exclude certain non-cash
accounting adjustments relating to revenue recognition.

((7)) Subject to the blend of profit within the Group's various jurisdictions.

 

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 22/23 sales can be downloaded from
www.kingfisher.com/investors (http://www.kingfisher.com/investors) .

 

We can be followed on Twitter (@kingfisherplc) with the Q3 results tag
#KingfisherResults.

 

Full year 22/23 results

Our next scheduled results announcement will be our results for the year
ending 31 January 2023, on 21 March 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
(http://www.otcmarkets.com/stock/KGFHY/quote) .

 

About Kingfisher plc

Kingfisher plc is an international home improvement company with approximately
1,530 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
31 October 2022. 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 (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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