Kingfisher Faces Profit Woes Amid French Market Struggles as UK Flourishes on 'Improve Not Move' Trend

Kingfisher, the parent company of B&Q and Screwfix, has issued its second profit warning in three months, attributing the downturn to weak sales in France.

However, the company remains optimistic about its UK operations, citing the growing popularity of the "improve not move" trend and the impact of interior design videos on TikTok.

The financial third quarter saw Kingfisher experience a nearly four per cent decline in sales, prompting a revision of its annual profit forecast from £590 million to £560 million. This comes after a previous downgrade in September from an initial forecast of £634 million. Despite making £758 million in profits in the 2022-2023 financial year, the company's shares fell by six per cent, making it the top faller on the FTSE 100.

The primary contributor to Kingfisher's struggles continues to be its French business. The weak performance was exacerbated by sluggish DIY sales and a delayed start to the heating and insulation season due to warmer weather. Consequently, total sales in France plummeted by 8.6 per cent to £1 billion in the three months ending on October 31.

In contrast, the UK and Ireland, including the TradePoint chain, experienced a 3.3 per cent growth in sales, reaching £1.6 billion. B&Q's UK e-commerce sales saw a remarkable 32 per cent year-on-year increase, constituting 12.9 per cent of total revenues, while overall sales rose by 1 per cent.

The company attributed this success to the "improve not move" trend, where consumers focus on enhancing their homes and gardens rather than relocating, driven by higher mortgage rates and soaring household bills.

Notable increases in sales were observed in various categories, reflecting consumer preferences influenced by trends popularised on TikTok. Interior paint sales rose by 7.6 per cent, wallpaper saw a 17 per cent increase, and solid wood mouldings were up by a fifth.

The trend of wall panelling kits on TikTok contributed to these positive figures. In the garden category, lawn mower sales surged by 78 per cent, and other power equipment sales for garden improvement increased by 60 per cent.

Thierry Garnier, the CEO of Kingfisher, highlighted the resilience of the UK market, stating: "Our UK banners performed well in the third quarter with B&Q, TradePoint and Screwfix growing sales and market share." Despite proactive cost-cutting measures, the weakness in the French market led to a reduction in the group's full-year profit guidance.

Looking ahead, Garnier outlined the company's strategy for the upcoming year, emphasizing a focus on growing market share in key regions and implementing productivity gains to counter wage inflation. While anticipating some product cost price inflation, he expressed confidence in the company's ability to maintain rational retail pricing and competitive price indices across all its banners.

As the current financial year approaches its end, Kingfisher reported a 3.4 per cent year-on-year decline in group like-for-like sales in the three weeks leading to November 18. The UK market remained resilient, while the French market continued to exhibit weakness.

Richard Lim, the CEO of Retail Economics, commented on the challenging conditions facing Kingfisher, noting a mixed picture across Europe. The UK's relative resilience was acknowledged, but Lim highlighted soft sales against a backdrop of rising interest rates, weak consumer confidence and a faltering housing market.

Lim concluded that tougher conditions are expected before signs of improvement, particularly given the sector's heavy dependence on a buoyant housing market, which remains under pressure amid the outlook for interest rates.

"All the signs point towards conditions getting tougher before we see signs of improvement. Inflation is on a steep trajectory downwards with a sustainable rise in spending power in sight. But the sector is heavily dependent on a buoyant housing market, which remains under intense pressure given the outlook for interest rates."