Kingfisher full-year profits fell 20.5% but like-for-like sales rose for B&Q and Screwfix. Here’s a look at what the analysts said.
“The B&Q business only managed limited growth, but this is on the back of 30 store closures, mostly in the fourth quarter.
“With Bunnings taking over Homebase, and the threat of its very successful heavyside DIY offer in Australia, this kind of store rationalisation is vital to making B&Q more lean and agile, and able to respond to imminent competitive threats quickly.
“Screwfix is the big highlight for Kingfisher, driving sales growth in the UK and Ireland. B&Q needs to utilise the multichannel lessons being learnt by the online business to help it adapt to rapidly evolving, modern buying practices.
“At 29%, online growth at B&Q is strong, but still represents just 6.4% of the business’ sales. This is set to keep growing quickly and, as a result, may require a more fundamental review of the store portfolio.
“B&Q’s management have shown themselves to be proactive and prepared to take tough decisions, but as competition is set to hot up with the new Australian entrant, accompanied by significant investment, their ability to keep B&Q in a dominant position will be tested.” – Matthew Rubin, Verdict Retail
“The company’s two core businesses are now relatively mature and management has ruled out acquisitions”
Freddie George, Cantor Fitzgerald
“Results were better than market expectations. The planned restructuring of the group over the next three years is likely to hold back earnings growth. In the meantime, the company’s two core businesses are now relatively mature and management has ruled out acquisitions.
The company should see some help though from the strengthening euro and a potential recovery in the French DIY market.” – Freddie George, Cantor Fitzgerald
“Kingfisher reported stronger-than-expected full-year numbers both in the UK and in France, although a challenging outlook in France and fiercer competition in the UK with the entrance of Wesfarmers should continue to weigh negatively on the investment thesis into FY17.
“Faster expansion in Germany may also provide excitement”
Christodoulos Chaviaras, Barclays
“Faster expansion in Germany may also provide excitement, proving potentially that a strong concept in the UK could also work in Germany, offering future upside.
“While the UK outlook is better, according to Kingfisher, we are conscious that Wesfarmers may disrupt the market in the next three years with their £500m of announced investment.
“Hence, FY17 Kingfisher’s profitability in the UK could come under more pressure than investors expect.” - Christodoulos Chaviaras, Barclays
“While the results came in slightly ahead of expectation benefiting from fourth-quarter French gross margin gains and some timing benefits on sales transfer from closed to still-open B&Qs, the main interest today was in terms of the update on the delivery of the group five-year strategy.
“Here we felt that the balance of delivery has shifted away from sales-driven to margin-harvesting. Discussion on digital growth highlighted, we thought, a somewhat introspective view of online penetration of the DIY market.
“Overall as we have highlighted recently, the disclosure that gains from all of the programmes are likely to amount to a modest £20m out of the total £500m in year one emphasises how much is being taken on trust here.
“This said we expect profit forecasts to move modestly up for 2016/17 reflecting base effects and to be underpinned by likely sterling weakness until the Brexit debate is behind us.
“Our cautious stance remains in place, based on the uncertain nature and extended period of the delivery and the likelihood that further adjustments to strategy and the associated costs of delivery will be required as the group updates its big-box estate and makes a more realistic evaluation of online/physical capacity requirements in the longer term.” - Tony Shiret, Haitong Research