Price pressures and supply fears are cutting kingfisher’s wings


General view of a B&Q DIY store, as the spread of coronavirus disease (COVID-19) continues, in Chiswick, London, Britain April 23, 2020. REUTERS / John Sibley / File Photo

  • First half profit up 62% to 669 mln stg
  • Raises sales outlook for the second half of the year
  • Projected annual profit of up to 950 million stg
  • To buy back 300 million stg of shares
  • Equities down 4.9%

LONDON, Sept.21 (Reuters) – UK home improvement retailer Kingfisher (KGF.L) reported a 62% rise in first-half profits as it experienced a DIY boom during the pandemic, but concerns Regarding inflation and products availability caused its shares to fall by almost 5%.

The group, which owns B&Q and Screwfix in the UK and Castorama and Brico Depot in France and other markets, said it experienced above-normal cost price inflation linked to certain raw materials and transport costs.

“We expect inflationary pressures to persist through the second half of the year as higher cost inventories are sold, but as demonstrated in the first half of the year, we are committed to maintaining our strong competitive position in price, “CEO Thierry Garnier told reporters on Tuesday.

He said that despite supply chain disruptions, the availability of the group’s products is currently higher than it was in January. However, stocks of wood, cement and some products containing semiconductor chips were still below target levels.

Kingfisher shares were down 4.9% as of 9:50 a.m. GMT, slashing 2021 gains to less than 30%, reflecting concerns about the outlook for inflation and availability.

Separately, on Tuesday, UK building materials supplier SIG (SHI.L) warned that an industry-wide material shortage is likely to continue this year.

Kingfisher reported adjusted pre-tax profit of 669 million pounds ($ 914.3 million) for the six-month period ended July 31, beating expectations and the 415 million pounds made a year earlier.

Many people discovered or rediscovered DIY during the COVID-19 crisis because they were forced to spend more time at home.

Kingfisher sales increased 22.2% at constant currencies to 7.1 billion pounds, with like-for-like sales up 22.8%.

The group said it has started its second half well, with resilient demand in all markets, although third-quarter sales through September 18 were down 0.6%, reflecting high numbers from a year ago. .

Kingfisher raised its outlook for the second half of the year, forecasting like-for-like sales down 7% to 3% from previous guidance of 15% to 5%.

He forecast 2021-2022 adjusted pre-tax profit of £ 910-950million, up from £ 786million in 2020-21.

The group also declared an interim dividend of 3.8 pence, up 38%, and plans to return 300 million pounds to shareholders via a share buyback.

Garnier said he had addressed many of Kingfisher’s past issues with “fixes” now complete in the UK and Poland and positive results in France through a stove repair strategy.

The group plans to accelerate the expansion of Screwfix in the UK and Ireland, targeting more than 1,000 stores compared to 900 previously, and will open its first Screwfix stores in France in 2022. It also plans to accelerate the expansion of Castorama Poland.

($ 1 = 0.7317 pounds)

Reporting by James Davey, editing by Jason Neely and Keith Weir

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