Kingfisher cut its full-year profit forecast to £590 million, down from £634 million. It reported a drop in first-half profit before tax of a third, to £317 million.
It came with what the FTSE 100 company called “weaker consumer sentiment” and a “challenging ... macroeconomic backdrop” in Poland, where high inflation is high and interest rates have risen sharply.
Those conditions also apply in the UK, where the Bank of England may hike the cost of borrowing for the fifteenth consecutive time this Thursday.
But Kingfisher’s chief executive Thierry Garnier told the Standard that while the company was “following carefully” the BOE rate call, he did not expect similar problems to hit the core UK market, where he runs 300 B&Q branches and around 840 Screwfix outlets.
“I think there is already a significant difference in consumer sentiment between Poland and the UK. It’s not only around rates, it’s around consumer sentiment and the perception of inflation and the cost of living.”
He also said that in the UK trade customers were “busy”, with over 80% of the professional builders it regularly surveys from its customer base saying they were getting busier.
The company’s trading update said its core UK business continued to have “positive momentum and “good growth.” It is testing smaller Screwfix outlets, called “Collect” and “SXR”, where builders can pick up orders from places too small for a full trade counter.
It also plans to roll out more, smaller B&Q Local branches to high streets, in a move away from the chain’s signature out-of-town warehouse-sized stores. The new format has been trialled in Camden and Palmer’s Green.
But Garnier said Kingfisher had not considered buying any of the bankrupt Wilko stores, after the collapse of the town centre homewares chain.
“We wish to have more B&Q Local around London, that’s our priority, but there is nothing specific to Wilko or other available space.”
Sales of big ticket items – typically kitchen and bathroom refits – were healthy and Kingfisher expects volume for higher-cost purchases to improve in the second half.
France’s Brico Dépôt had a “weaker performance ... following unsuccessful reallocation of marketing to digital”, adding to the impact of the problems in Poland.
Richard Hunter, head of markets at Interactive Investor, said Kingfisher had “a troubled half-year of trading,” adding:
“Despite an accelerated transformation which was required due to the pandemic, Kingfisher remains a work in progress. The main UK and Ireland market clearly has its own challenges in what is likely still a rising interest rate environment, let alone the ferocity of competition which is central to retailing as a whole.”
Kingfisher’s stock fell 16p to 220p, a drop of 7%.
There were even bigger losses for Safestyle, the maker of windows and doors. It slumped by 44% to 4.68p, a record low, after it issued its third profit warning this year, with orders falling behind forecasts from mid-August.
The run of bleak news from the sector left other DIY companies looking exposed on the stock market. Wickes fell 3p to 141.3p.