REG - Kingfisher PLC - Q3 Trading Update

KingfisherAnnouncement

22/11/2023 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20231122:nRSV1908Ua&default-theme=true

RNS Number : 1908U  Kingfisher PLC  22 November 2023

Q3 trading update to 31 October 2023

 

22 November 2023: Kingfisher plc ('Company', 'Group' or 'Kingfisher') is today
providing its Q3 23/24 sales.

 

Key points

·    Q3 sales of £3.2bn; total sales -2.1% (reported) and -2.7% (constant
currency)

·    LFL -3.9% including a -0.4% calendar impact((1)) with overall volumes
continuing to show an improving trend

·    Underlying retail and trade consumer trends resilient in the UK and
improving in Poland, in line with our expectations; market trends in France
weaker than expected

·    Q3 by region:

o UK & Ireland: market share gains at B&Q (including TradePoint) and
Screwfix with resilient underlying sales trends

o France: Castorama performing in line with the market; underperformance at
Brico Dépôt due to significantly higher weighting of building materials
(including insulation) and electricals, plumbing, heating & cooling (EPHC)
products (which have seen a delayed start due to the warmer weather, against
strong prior year comparatives)

o Poland: improvement in sales trend since H1; market share remains up
significantly on a two-year basis

·    Opened four Screwfix stores in France in Q3 (13 in total); Screwfix
online launched in six new European markets

·    Total e-commerce sales growth of +7.4%, supported by continued strong
growth of B&Q's marketplace (reaching 35% of B&Q's e-commerce
sales((2)) in October)

·    Full year adjusted PBT guidance lowered to c.£560m((3)) to reflect
continuation of Q3 trends in Q4, including continued resilience in the UK and
market weakness in France; now expect full year free cash flow of c.£470m

·    Launched first tranche of new £300m share buyback programme, with
c.£26m completed to date

 

Unaudited Q3 23/24 sales (three months ended 31 October 2023)

 

                      Sales     % Total   % Total            % LFL

                      2023/24   Change    Change             Change((4))
                      £m        Reported  Constant currency  Constant currency
 UK & Ireland         1,597     +3.3%     +3.3%              +1.1%
 - B&Q                946       +1.0%     +1.0%              +1.1%
 - Screwfix           651       +6.8%     +6.8%              +0.9%
 France               1,034     (8.7)%    (8.5)%             (8.6)%
 - Castorama          543       (6.9)%    (6.7)%             (6.7)%
 - Brico Dépôt        491       (10.6)%   (10.4)%            (10.6)%
 Other International  608       (3.7)%    (6.8)%             (7.6)%
 - Poland             438       (2.9)%    (7.5)%             (9.0)%
 - Iberia((5))        90        (4.1)%    (3.9)%             (3.9)%
 - Romania            77        (6.6)%    (5.8)%             (3.0)%
 - Other((6))         3         n/a       n/a                n/a
 Total Group          3,239     (2.1)%    (2.7)%             (3.9)%

Thierry Garnier, Chief Executive Officer, said:

 

"Our UK banners performed well in Q3, with B&Q, TradePoint and Screwfix
growing sales and market share. In France, our performance was impacted by a
weak retail market, as well as a delayed start to insulation, plumbing and
heating sales - to which Brico Dépôt is more heavily weighted - due to
unusually warm autumn weather, and strong prior year comparatives in these
categories. In Poland we are seeing early signs of recovery in the trading
trend, against an incrementally more positive consumer and economic backdrop.
Reflecting the weakness of the French market, and notwithstanding our
proactive cost actions, we have lowered our Group profit guidance for the full
year.

 

"We continue to focus on our execution and driving our strategy forward. Our
online marketplaces are growing rapidly, with B&Q's marketplace reaching
35% of its e-commerce sales in October. Screwfix has continued its
international expansion, by launching as a pure-play online retailer in six
new European countries, and opening four new stores in France in the quarter.
We also continue to harness AI and data to support sales, profit and cash,
including by growing our retail media proposition across the Group.

 

"As we move into 2024, we are focused on what is in our control. First, a
continued focus on growing market share in the UK, France and Poland with
delivery of our strategic growth initiatives. Second, driving productivity
gains to offset wage inflation. And finally, delivering on our free cash flow
and shareholder returns targets. We expect to see some product cost price
inflation, albeit at a significantly lower level, and expect rational retail
pricing and competitive price indices at all our banners.

 

"On the medium-to-longer term outlook, we remain very positive for home
improvement growth in our markets, and our ability to grow ahead of our
markets."

 

Current trading and outlook

Q4 has started largely in line with the trends of Q3, including continued
resilience in the UK and market weakness in France (with Brico Dépôt closing
the gap in performance to Castorama). For the three weeks to 18 November
2023((7)), Group LFL sales were -3.4%.

 

We continue to take decisive cost actions in France, more than offsetting the
impact of inflation. However, given continued market weakness, this is not
sufficient to offset the impact of lower sales in this region. Reflecting our
expectation for this trend to continue in France for the balance of the year,
we now expect FY 23/24 Group adjusted pre-tax profit (PBT) to be c.£560m
(previous guidance c.£590m).

 

Our revised sales expectation flows through to cash, and so we now expect to
deliver c.£470m of free cash flow for the year (previous guidance
>£500m). This free cash flow is supported by ongoing sales and profit
resilience in the UK as well as the unwind of working capital flows in the
prior year. We continue to expect a positive contribution from inventory
unwind, together with disciplined capital allocation, which underpin our
expectation of free cash flow delivery. We also reaffirm our commitment to our
recently commenced £300m share buyback programme.

 

Trading in France - Castorama in line with market, Brico Dépôt mix effect,
cost actions being taken

As set out in our H1 23/24 results, Q3 in France started with a slight
slowdown in the sales trend relative to Q2 (August LFL was -5.3% compared to
the Q2 LFL of -3.5%). However, the French home improvement market deteriorated
far more than expected in September with Banque de France sales data down
9.1%. Although the market and trading trends have improved in October (and in
Q4/November to date) compared to September, we have assumed that the French
market will remain at least as weak as October throughout Q4.

 

As a result of the subdued environment in France this year, we have been
proactively managing our operating costs to align as far as possible to
trading conditions. The business has strengthened actions on flexing staffing
levels, lowered discretionary spend and has accelerated several structural
cost reduction initiatives in H2. These actions will also support improved
profitability in France over the medium-term.

 

However, at the assumed level of market weakness in Q4, the cost efficiencies
described above and being achieved by the business are not sufficient to
offset the bottom-line impact between now and the end of the financial year.

 

                    % LFL Change
           Q1 23/24  Q2 23/24  Aug     Sep      Oct      Q3       Q4

                     2023    2023     2023     23/24    to date((7))
 Banque de France
 -Contested        0.5%      1.6%      (0.5)%
 -Corrected                                    (9.1)%   (5.7)%
 Kingfisher France  (4.1)%    (3.5)%    (5.3)%  (12.2)%  (8.5)%   (8.6)%   (7.5)%
 -Castorama        (3.1)%    (2.3)%    (4.2)%  (9.4)%   (6.7)%   (6.7)%   (7.5)%
 -Brico Dépôt      (5.2)%    (4.8)%    (6.5)%  (15.0)%  (10.5)%  (10.6)%  (7.5)%

 

Note - since September 2022, Kingfisher contested the calculation of Banque de
France sales data. Revisions have now been made to the calculation methodology
from and including September 2023. Kingfisher France will retrospectively
submit its sales data to Banque de France from and including September 2023

 

At Castorama, which is currently performing in line with the market, we
continue to refine our competitive brand positioning. To support growth ahead
of the market in 2024, the business will launch an e-commerce marketplace and
will accelerate the development of its trade customer proposition. Brico
Dépôt has been relatively more exposed to current French market weakness,
due to its higher category weighting towards building materials (which
includes insulation products) and electricals, plumbing, heating & cooling
(EPHC) products. Sales in these categories have been delayed due to the warmer
weather, while also facing very strong comparatives. The marketing issues at
Brico Dépôt that we described in our H1 results have been fully resolved.
Performance has improved since September, with Brico Dépôt closing the gap
in performance to Castorama in Q4/November to date. The business continues to
focus on building a differentiated discounter proposition, and maintaining a
strong price index to deliver value to its customers.

 

Longer term, our strategy in France remains focused on improving sales
densities and making our operating model more efficient.

 

Q3 trading highlights

All commentary below is in constant currency.

 

UK & IRELAND

Total sales +3.3% (LFL +1.1%), reflecting resilient consumer demand. Both
banners grew faster than their respective markets (as measured by the British
Retail Consortium, Barclays and GfK), with particularly strong market share
gains seen at Screwfix.

 

·    B&Q sales +1.0%. LFL +1.1%, with resilient retail trends outpaced
by trade sales. The business saw good performances in surfaces & décor,
tools & hardware and outdoor categories in the quarter, offsetting a
slower start to autumn and winter product sales. B&Q's total e-commerce
sales increased by 31.8% YoY, with an overall e-commerce sales penetration of
12.9% (Q3 22/23: 10.1%), driven by the further scaling of B&Q's e-commerce
marketplace, which reached a participation of 35% in October (i.e., B&Q's
marketplace gross sales divided by B&Q's total e-commerce sales).
Marketplace gross merchandise value (GMV)((8)) increased by over 290% YoY.
B&Q opened one new store in Q3 (a B&Q Local compact format in Sutton).
TradePoint, B&Q's trade-focused banner, outpaced retail sales in the
quarter with LFL sales of +3.1%, reaching a penetration of 23% of B&Q's
total sales (Q3 22/23: 23%). The banner continues to successfully strengthen
its product and services proposition for trade customers, including trade-only
deals and events. Customer engagement and loyalty also continues to
strengthen, with membership sign-ups growing YoY.

·    Screwfix sales +6.8%. LFL +0.9%, with robust demand from trade
customers and good YoY growth in the tools & hardware and building &
joinery categories. The unseasonably warm weather in the UK in September and
October impacted sales of plumbing and heating products. Screwfix opened 11
net new stores in the UK & Ireland in the quarter, for a total of 23 net
new stores opened in the nine months to 31 October. Note that total sales for
Screwfix UK & Ireland include sales arising from the acquisition on 20
March 2023 of the assets of Connect Distribution Services (renamed Screwfix
Spares). Since acquisition, Screwfix Spares has performed in line with
expectations, contributing c.2% to total Screwfix sales growth in Q3. The
results of Screwfix France are recorded within the 'Other International'
division - see below for further information.

 

FRANCE

Total sales -8.5% (LFL -8.6%), with trading in France impacted by a weak
market backdrop affecting both consumers and trade. Similar to the UK,
unseasonably warm weather in September and early October led to a slower start
of insulation, plumbing and heating sales, and the businesses faced strong
comparatives from Q3 last year (when consumers anticipated energy price
increases and risks of power shortages, driving strong sales of heating and
energy efficiency products).

 

·    Castorama sales -6.7%. LFL -6.7%, with performance in line with the
market. Market weakness in France was reflected broadly across the categories,
while electricals, plumbing, heating & cooling (EPHC) lapped strong sales
of heating and energy efficiency products in the prior year, with performance
improving towards the end of the quarter.

·    Brico Dépôt sales -10.4%. LFL -10.6%, a weaker performance relative
to Castorama due to the impact of unseasonably warm weather, with the business
exposed to a significantly higher weighting of building materials (including
insulation) and autumn and winter season products. Sales were also impacted by
exceptionally high sales of insulation, heating propellants and generators in
the prior year. Since the correction to marketing budget allocation in
mid-July, the business has seen an incremental progression of in-store
traffic.

 

OTHER INTERNATIONAL

·    Poland sales -7.5%. LFL -9.0%, with performance improving from H1 as
consumer confidence, while still negative, continued to recover. Sales trends
improved across most categories, apart from EPHC where performance was
impacted by a comparative period of high demand in products such as heating
propellants, as consumers anticipated energy price increases. On a two-year
basis, Castorama gained market share in the quarter (to 30 September, as
measured by GfK). Following the one new store opening in H1, Castorama opened
one new medium-box store in Q3 and intends to open three further stores in Q4,
in line with its target of five store openings in this financial year.

·    Iberia sales -3.9%. LFL -3.9%, with good performance seen in the
building & joinery, kitchen and bathroom & storage categories.
Unfavourable weather impacted sales of seasonal categories.

·    Romania sales -5.8%. LFL -3.0%, reflecting a resilient performance
against strong prior year comparatives (+4.2%). Positive YoY growth was
achieved in EPHC, bathroom & storage and outdoor categories.

·    Other consists of the consolidated results of Screwfix International,
NeedHelp and franchise agreements. While these businesses are in their early
investment phase, we continue to be encouraged by the results we have seen to
date. With four new openings in the quarter, there are now 13 Screwfix stores
in operation in France. Following the early positive results in France, we
launched Screwfix as a pure-play online retailer (under the domain name
Screwfix.eu) in six new European countries (Poland, Spain, Belgium, the
Netherlands, Sweden and Austria), leveraging Screwfix's distribution centre in
France for fulfilment.

 

 

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)) B&Q's marketplace gross sales divided by B&Q's total e-commerce
sales. Please refer to the glossary in Kingfisher's 2023/24 Half Year Results
announcement for definitions of e-commerce sales and penetration metrics.

((3)) Guidance assumes current exchange rates.

((4)) 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.

((5)) Brico Dépôt Spain and Portugal.

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

((7)) 'Q4 23/24 LFL sales (to 18 November 2023)' represents the period from 29
October to 18 November 2023 compared against the equivalent period in the
prior year (i.e., 30 October to 19 November 2022). The figures are provisional
and exclude certain non-cash accounting adjustments relating to revenue
recognition.

((8)) Marketplace gross sales is the transaction value (excluding VAT) from
the sale of products supplied by third-party e-commerce marketplace vendors.
Returned and cancelled orders are excluded. Marketplace gross merchandise
value (GMV) is the total transaction value (including VAT, and including
returned and cancelled orders) from the sale of products supplied by
third-party e-commerce marketplace vendors. Marketplace GMV is the basis on
which our commissions from third-party vendors are determined.

 

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 23/24 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 23/24 results

Our next scheduled results announcement will be our results for the 12 months
ending 31 January 2024, on 25 March 2024.

 

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 over 2,000
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 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.

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTUARBROSUAUAA