Release Date: March 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kingfisher PLC (KGFHF, Financial) achieved market share gains in key regions including the UK, Ireland, France, and Poland, driven by strategic initiatives and strong execution.
- The company saw significant growth in trade and e-commerce, with trade sales penetration increasing by 4.9 points and e-commerce sales penetration reaching 19%.
- Kingfisher PLC (KGFHF) maintained strong financial discipline, delivering adjusted profit before tax and free cash flow in line with or ahead of initial guidance.
- The company successfully reduced same-store inventory by GBP107 million and achieved GBP120 million in structural cost reductions.
- A new GBP300 million share buyback program was announced, reflecting confidence in future cash generation and strong free cash flow.
Negative Points
- Total sales for the group in constant currency were 0.8% lower, with like-for-like sales declining 1.7%.
- Adjusted profit before tax decreased by 7% to GBP528 million, and group statutory profit before tax was GBP307 million due to noncash impairments.
- The French market experienced a like-for-like sales decline of 6.2% amidst a weak home improvement market, impacting overall performance.
- Big-ticket category sales, including kitchens and bathrooms, were 4.5% lower for the year, reflecting broader market weakness.
- The Turkish joint venture, Koçtaş, contributed an overall loss of GBP15 million due to a highly volatile macroeconomic and trading environment.
Q & A Highlights
Q: Can you talk about the cash generation or the cash consumption of Screwfix France? Why are you only opening five stores in the year ahead?
A: Thierry Garnier, CEO, explained that the focus is on store sales like-for-like growth and ensuring each store's maturation aligns with expectations. Expansion is not the primary focus, and the limited CapEx is not a constraint. The plan is to open five stores in 2025, focusing on ensuring the existing stores perform well.
Q: Is the target for Screwfix city stores in addition to the existing target for Screwfix store openings? What is the strategy for compact stores?
A: Thierry Garnier, CEO, confirmed that the Screwfix city stores are in addition to the existing target of 1,000 stores. Compact stores are seen as critical for the future, with validated formats like Screwfix city and B&Q's 2,000-square-meter retail park format. Other formats are still being fine-tuned.
Q: Could you give more detail on the logistics reduction and the potential to do more? How should we think about the potential to reduce stock going forward?
A: Thierry Garnier, CEO, and Bhavesh Mistry, CFO, discussed the reduction of logistics space and inventory. They have implemented new forecasting tools and reduced logistics space significantly, with plans for further reductions. Inventory management improvements are ongoing, with potential for further reductions.
Q: Why is now the right time to be gearing up the balance sheet given the cautious outlook? What is included in the GBP145 million of costs and mitigations?
A: Bhavesh Mistry, CFO, clarified that they are not gearing up the balance sheet, maintaining a strong position with a net debt to EBITDA ratio of 1.6 times. The GBP145 million includes cost and gross margin mitigations, with better-than-expected negotiations with suppliers and structural cost actions.
Q: What are you expecting from the Homebase impacts on B&Q sales? How is CapEx being allocated in France?
A: Thierry Garnier, CEO, noted early positive impacts on B&Q sales from Homebase changes, though it's too early for specific numbers. Bhavesh Mistry, CFO, stated that CapEx in France is within their 3% envelope, focusing on rightsizing and modernizing the estate without significant additional expenditure.
Q: Can you provide more color on consumer behavior in Poland and the overall macro backdrop?
A: Thierry Garnier, CEO, mentioned an improvement in consumer confidence in Poland, driven by real wage growth and decreasing inflation. However, short-term volatility and geopolitical concerns remain, with a more positive outlook expected in the medium term.
Q: What are the gross margin opportunities over the next few years?
A: Bhavesh Mistry, CFO, highlighted several initiatives, including buying for growth, marketplace expansion, and retail media, which are expected to drive margin improvements. These initiatives are already underway and are expected to contribute positively to margins in the coming years.
Q: Are there any product categories where you see opportunities to increase sales densities?
A: Thierry Garnier, CEO, identified trade as the biggest opportunity for increasing sales densities, learning from peers like Home Depot and Lowe's. Other categories like cleaning products also present opportunities, but trade remains the primary focus.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
