European home improvement retailer, Kingfisher, has downgraded its annual profit forecast by 7% due to lower sales in France and Poland. The company, which owns B&Q and Screwfix in the UK, as well as Castorama and Brico Depot in France, reported a pick-up in its UK and Ireland markets, but this was not enough to offset the decline in other areas. As a result, Kingfisher’s shares fell by 5%.
The company now expects its pre-tax profit for the 12 months to the end of January to be around £590 million ($730 million), which is 22% lower than the previous year. Underlying sales in Poland fell by 10.9% in the six months to the end of July, while low consumer confidence in France resulted in underlying sales being 3.8% behind.
Following the profit forecast downgrade, shares in Kingfisher, a member of the FTSE 100 index, dropped 5% to 224 pence in early trading. Analysts at Investec expressed their belief that the outlook for the company would continue to be challenging in the near future.
Investec commented, “We think the shares are unlikely to perform until investors are prepared to look through the weak consumer environment, inflationary pressures, and higher interest rates.”
In contrast to the decline in sales in France and Poland, Kingfisher reported an increase in underlying sales of 1.7% in the UK and Ireland during the same period. This growth was driven by Screwfix, which was able to expand its market share. Kingfisher plans to further develop Screwfix as an online retailer across Europe.
Despite the challenges faced by the company, Kingfisher remains optimistic about the future. It stated that it is “very positive” about the outlook for home improvement in its markets in the medium to long term. To demonstrate its confidence, the company announced a new £300 million share buyback program, set to commence in October.
More detail via Reuters here… ( Image via Reuters )