Kingfisher upgrades profit forecast amid rising margins

Kingfisher, the parent company of B&Q and Screwfix, reported a 1.4% decline in sales to £6.8 billion for the six months ending July 2023, with like-for-like sales down 2.4%. Despite this drop, pre-tax profit increased by 2.3% to £324 million, prompting the company to raise its full-year profit forecast to between £510 million and £550 million, up from a previous estimate of £490 million to £550 million. The retailer also anticipates free cash flow of £410 million to £460 million. The improvement in profit margins is attributed to effective cost-cutting measures, with Kingfisher expecting to achieve £120 million in savings this financial year. Additionally, the company reported a 4.3% reduction in net inventory year-on-year, indicating robust inventory management practices. However, the home improvement market remains challenging, particularly in the UK and Ireland, where like-for-like sales fell by 0.2% to £3.4 billion. Seasonal sales were negatively impacted by poor weather conditions in the second quarter, and demand for larger home improvement items has been weak. In contrast, international markets saw a slight increase in like-for-like sales, driven by strong performance in Iberia and Romania, as customers focused on home repairs and renovations. Analysts suggest that while the home renovation market is still facing difficulties due to high borrowing costs, there are signs of potential recovery in the housing market, particularly in the UK. Kingfisher is positioned for growth in the coming years, although challenges remain, especially in selling big-ticket items and navigating the tough conditions in its French stores.