B&Q owner Kingfisher (KGF) bounces back ahead of CEO’s departure

With new convenience stores on the cards, UK sales could receive more of a boost in the near future.

Article updated: 15 May 2019 11:00am Author: Helal Miah

  • 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.

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Helal Miah portrait photo
Helal Miah

Investment Research Analyst

After graduating with an economics degree from University College London, Helal started his career within private banking at Smith & Williamson Investment Management and later held analyst and fund manager roles with the Industrial Bank of Japan, Schroders and Mitsubishi Corporation. He is a chartered fellow of the Chartered Institute for Securities & Investment.