Kingfisher first-quarter sales jump: what the analysts say

“While B&Q continues to suffer due to store rationalisation, Screwfix is growing at an impressive rate. Though this is partly driven by the opening of 10 new stores, the retailer’s strong multichannel credentials are also clearly driving sales, with growing acceptance in the DIY sector for purchasing through remote channels and utilising the convenience offered by click-and-collect.

“Its international businesses are having an increasingly important impact on Kingfisher’s results.

“Poland, in particular, was boosted by favourable market conditions and the inclusion of new product ranges.

“Kingfisher is clearly realigning its business rapidly away from big sheds towards a multichannel approach in the UK, which is resulting in contrasting fortunes for B&Q and Screwfix.

“However, this is an important step in preparing for changing consumer attitudes in DIY and will put the wider business in a much stronger position in the future.” – Matthew Rubin, Verdict Retail.

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“The core UK and French divisions have performed ahead of expectations, despite unhelpful weather and increasing competition.

“Forecasts may not move much today, but sentiment should be boosted by B&Q’s resilience and additional strong performances at Screwfix, Brico Dépôt and in Poland.

“Early milestones in the five-year transformation programme are being achieved (or exceeded).

“The key risks include a potential deterioration in the UK, French and Polish consumer spending environment, including Brexit, sterling and euro currency fluctuations and a deterioration in the European Union trade regime.

“Another key risk is that the ‘One’ transformation programme fails to deliver the indicated £500m profit uplifts.” – Scott Ransley, Stifel.

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“The significant change to the operational board over the last three years is, we believe, leading to a major shift in the company’s culture and strategy.

“There is also a growing acceptance that after a number of false dawns, the ranges and the assortments of the international businesses have to be more properly integrated and the diversity of its cross-border formats reduced.

“Management, after our scepticism, in our view is clearly focused on successfully executing its strategy.” – Freddie George, Cantor Fitzgerald.

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“Looking through the individual like-for-like performances here, clearly big ticket/trade has outperformed in the UK and the Polish result may have benefited from some timing issues around the introduction of the new sales tax. Castorama in France may have been marginally disappointing, but owing to a more margin-retentive trading stance.

“The pace of the transformation programme is hinted at and the company seems confident that this is at least in line with its expectations, mainly focusing on rationalising buying offices and IT-related introductions in the UK.

“Moving forward, the new competitive position in the UK should start to emerge following the Homebase takeover by Bunnings. Equally, the broadening out of IT initiatives to non-English speaking parts of the group will present the first real credibility test to the overall transformation plan.

“This trading was broadly what we expected and there is nothing here to change any pre-existing views, we think. Clearly, Kingfisher has been a beneficiary of Brexit fears and the share price is still susceptible to news flow on that front. Beyond that it is still a case of: can they pull it off?

“The shares look very expensive to us, relative to the peer group, on the basis of the frankly undemanding benefits to be achieved in 2016/17 and 2017/18.

“We do not believe that Kingfisher will achieve all of the aims of what is a massive structural and cultural change, even allowing for the strength of the new management team.” – Tony Shiret, Haitong Research.