B&Q and Screwfix owner Kingfisher: Weak trading in France and £45m tax hit cause shares to plummet

Shares in Kingfisher, the parent company of B&Q and Screwfix, have dropped nearly 13 per cent after it tightened profit guidance due to weak trading in France and a higher tax bill in both France and the UK.

Kingfisher expects the impact of changes to employers’ national insurance contributions (NICs) announced in the UK’s latest budget to be £31m, although it will “offset the impact of wage increases through structural cost reductions and productivity gains”, the company said.

The wage threshold at which employers must start paying the tax has been lowered from £9,100 to £5,000, while the overall tax rate has risen 1.2 per cent to 15 per cent.

It is also expecting a hit from similar tax rises in France, where trading has continued to slow.

Kingfisher subsequently tightened its profit guidance range by £10m. It now expects adjusted profit before tax of £510m to £540m, down from £510m to £550m.

The company reported overall sales of £3.2bn in the twelve weeks to October 31, flat year on year.

Sales in the UK and Ireland rose 1.2 per cent, driven by 4.6 per cent growth at Screwfix and despite a 1.1 per cent drop in sales at B&Q.

Kingfisher said uncertainty ahead of the Autumn budget had dampened UK sales, as well as poor weather in October. Play Video

Sales in France continued to weigh on profit, with overall sales down 4.2 per cent on a constant currency basis.

Kingfisher’s performance in other international markets was strong, however, with 3.7 per cent sales growth in Poland and 3.7 per cent growth in Spain and Portugal.

Richard Hunter, head of markets at interactive investor, said: “Areas remain where Kingfisher needs to get its own house in order, most notably an underperforming French operation which accounts for 30 per cent of group sales.”

“In the latest quarter, the situation was helped neither by the fact that consumer optimism remains patchy nor by a Budget ahead of which there was some reluctance to spend,” Hunter added.

Chief executive Thierry Garnier said: “Overall trading in the third quarter was resilient. Improved performance in August and September was offset by the impact of increased consumer uncertainty in the UK and France in October, related to government budgets in both countries.

“All our banners in the UK, France and Poland performed in line or ahead of their respective markets, with particularly strong market share gains at Screwfix.

“We continued to see improved volume trends in our core categories, supported by repairs, maintenance and existing home renovation. As expected, sales of our ‘big-ticket’ categories remained soft, although we are seeing early signs of improvement.

“Looking towards next year, recent political and macroeconomic developments have layered incremental uncertainty onto the near-term outlook in our markets. And so we continue to focus our energy on what we can control – delivering further market share gains through our key strategic priorities, and managing our retail prices, costs and cash effectively.”

AJ Bell investment director Russ Mould said: “Kingfisher remains in the club of companies which prospered during the pandemic but have struggled ever since. A plan is in place to drive greater sales to trade customers, do more via e-commerce, and roll out more compact stores.”

“This plan will only work if homeowners are ready and able to splash the cash on home improvement projects, supported by a strong economy which makes people feel secure in their jobs and happy to shell out money.