Kingfisher shares drop following plans of a foreign market exit

Announcement comes after sales drop across the board

Article updated: 21 November 2018 11:45am Author: Graham Spooner

  • The second largest home improvement group in Europe continues to struggle and will exit Russia, Spain and Portugal to focus on key markets
  • The group’s like for like sales dropped in the third quarter, sending shares down 3.5% in early trading
  • We recommend Kingfisher as a ‘hold’ for medium risk investors seeking a balanced portfolio

This morning we have had a third quarter trading update from home improvement retailer Kingfisher which has done little to allay fears over the group’s situation ahead of the important Christmas period.

Despite the CEO stating that the group are continuing to make progress in their transformation plan, the shares are down 3.5% in early morning trading and 30% year-to-date.

This is likely due to the fact that like for like sales were down by 1.3% and the performance of its French operations continue to disappoint, with Castorama’s like for like sales down by 7.3%. All is not so well at home either, with B&Q sales falling 2.9%.

The group has made the strategic decision to focus on markets where it has, or can reach, a market leading decision. Therefore, they will be exiting Spain, Portugal and Russia in order to focus on target markets.

More positive news for investors is the announcement that the group is returning a further £50m via a share buyback, completing its £600m return commitment in the first three years of the plan.

Looking ahead, in the UK B&Q remains the market leader, though conditions have been difficult, the troubles at rival Homebase have served to bolster the group and Kingfisher’s trade-focused operation, Screwfix, has grown rapidly. Therefore the group expects to grow gross margin in the UK as well as Poland where total sales increased almost 4% this quarter. For France, the outlook is a mixed bag; the group expect to grow the gross margin at Brico Dépôt however the outlook for Castorama is more uncertain given the difficulty of the trading environment.

While the outlook in the UK looks better and there’s a good level of cash flow, the consistently poor performance of the French business and disruption from the transformation plan, ever more so now the group will be pulling out of more countries, means that the shares are no better than a ‘hold’.


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Graham Spooner

Investment Research Analyst

Graham started out as a fully authorised dealer on the Stock Exchange trading floor and for various banks, before becoming an FSA-approved investment adviser. Now a respected voice in the media, Graham’s share tips and comments on the markets are frequently sought by the national press.