B&Q owner Kingfisher reinstated its dividend as annual profits soared on booming DIY demand from people stuck at home during the Covid-19 pandemic, but warned of a slowdown in sales growth in the second half.
Pre-tax profits rose 634% to £756m on a 7.2% increase in sales to £12.3bn. A dividend of 8.5p a share was declared against 3.33p a year earlier. First quarter like-for-like (LFL) sales were up 24.2% to March 18, Kingfisher said on Monday.
On an adjusted basis pre-tax profits rose 44.4% to £786m. The company forecast current first-half low double-digit LFL sales growth and was planning for a fall in second half LFL sales of 5% – 15%, impacted by a cooling in demand, strong year on year comparables and uncertainty over the macroeconomic and consumer environment.
Growth was driven by a boom in online sales, which rose 158%. E-commerce was already a growing segment for the business, which also owns Castorama and Brico Depot in France and Screwfix in the UK, as it rose 8% in the year ending January 2020. However, the explosive growth during lockdown came as people tried to do up the homes they were confined to.
“Current trading remains positive and, while visibility is limited for the year as a whole, we are confident of continued outperformance of our wider markets,” said chief executive Thierry Garnier.
“The Covid crisis has established new longer-term trends that are clearly supportive for our industry – including more working from home, the renewed importance of the home as a ‘hub’, and the development of a new generation of DIY’ers – and we expect these to endure.”
Interactive Investor head of markets Richard Hunter said initial tailwinds from the pandemic “are unlikely to be repeated with the initial surge of demand now over”.
“From a structural perspective, it remains to be seen whether the likely return to the office will halt such strong growth, or whether the fact that home working will still remain to some extent provides future opportunities.”
“At the same time, as this year progresses, Kingfisher will find itself up against some extremely strong comparatives. The second and third quarters of the previous financial year in particular, where explosive growth was enabled during the height of restrictions, will be especially hard to replicate.”
Hunter added that “there may be a feeling that the shares are currently up with events, as reflected by the market consensus of the shares as a hold”.
