Profits at B&Q owner Kingfisher fell by nearly a third in the first half of the year as the popular DIY craze ended, but the company is benefiting from soaring demand for home insulation.
Pre-tax profit for Kingfisher, which owns the B&Q and Screwfix chains in the UK as well as Castorama and Brico Dépôt in France, fell to £474m in the six months to July 31, down almost 30% year-on-year.
Same-store sales fell 4.1% year over year. Kingfisher had a very strong first half of last year as DIY stores were allowed to stay open during the Covid-19 lockdown, while the shift to working from home prompted many to DIY their homes and gardens.
That appears to be over, with Kingfisher chief executive Thierry Garnier warning that “the environment will be more challenging” as a recession looms and household budgets are hit by soaring energy and food bills.
Shares fell nearly 6% on Tuesday morning, making Kingfisher one of the biggest losers on the FTSE 100.
“Cost of living [crisis] Could be worse in the UK [than France],” Garnier said. “The French government decided very early on to cap energy prices…We very much welcome the new government’s decision [UK] Prime Minister in this regard. “
However, Garnier said the energy crisis has driven up demand for insulation products such as attic insulation. At B&Q, sales over the past three weeks were up 110% from pre-pandemic levels and up 82% year over year. Overall, insulation sales across the group increased 70% from 2019 and 32% from a year earlier.
He said Liz Truss’ top priority should be supporting people facing soaring energy bills, especially those on low incomes, but he also stressed the importance of taking long-term steps to improve home insulation and overall energy efficiency. “Houses in this country are relatively poorly insulated. We need the government to make a decision on that,” he said.
kingfisher sent some advices For the UK government, for example lowering stamp duty for homebuyers working on energy efficiency.
In the first half, the company delivered “very resilient” revenue, Garnier said, noting that like-for-like sales are still 16.6% above pre-pandemic levels, and that Kingfisher has gained market share.
Kingfisher’s in-store product availability has returned to “pre-pandemic levels” after supply chain issues left shelves short, he said, and demand for outdoor and big-ticket items such as kitchens and bathrooms is good. He added that there was no sign of customers “cutting prices” into the cheaper range.
Margins fell as the company tried to deal with rising raw material costs and supply chain pressures. Cost pressures are starting to ease, especially prices for raw materials such as metals and plastics, as well as shipping costs, Garnier said.
But he also warned that Kingfisher – like the wider retail sector – faces economic uncertainty, saying: “We are wary of a more uncertain economic outlook in the second half of the year. So we’re focused on our customers Provide them with value when they need it most.”