With new convenience stores on the cards, UK sales could receive more of a boost in the near future.
B&Q owner Kingfisher (KGF) bounces back ahead of CEO’s departure
- The DIY chain enjoyed a sales bounce back, owing much to the warm spring weather and sunny Easter weekend.
- As expected, sales in the UK and Ireland increased but its French brands continue to struggle with sales down 5.1%.
- The challenges in the retail environment continue and so at best we recommend a ‘hold’ rating.
Despite ongoing issues at certain parts of the business, Kingfisher has reported a good set of numbers for Q1 2019 as group sales amounted to £2.8bn, up just 0.3%, but better on a like for like and constant currency basis of 0.8%. Its largest brand, B&Q in the UK and Ireland delivered an increase in sales of 2.8%, ahead of expectations and boosted by the weather over the Easter weekend. Meanwhile the professional market focussed Screwfix business continued its rapid growth at 9.6% and is still opening new stores. However, its French brands Castorama and Brico Depot continue to struggle with sales down 5.1%.
Veronique Laury, the outgoing CEO who has struggled to deliver on her “One Kingfisher” strategy, did highlight the globally coordinated marketing campaign for a range of outdoor products with other ranges to follow later. The news regarding the concept of convenience stores in this segment of the retail market is interesting and is a reminder of Halford’s opening smaller high street stores with some success. No new details were revealed regarding a replacement for Veronique Laury, but no doubt this will be amongst the questions being asked in the investors and media days scheduled for today and tomorrow.
Our View on Kingfisher - Hold
The shares have been a poor performer over the last few years, partly reflecting the issues with retailers in general given competition from both online stores and the likes of B&M. For us, overall there remain too great challenges in the retail environment to justify investors buying into the group. We can therefore only recommend a ‘hold’ rating at best for those seeking a balanced return and willing to accept a medium level of risk.
If you're looking to invest in the General Retailers sector and you're not currently a customer of The Share Centre, sign up today. You can also view the full range of General Retailer companies and their share prices.
All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.