Price pressures, supply fears clip Kingfisher's wings

© Reuters. FILE PHOTO: General view of a B&Q DIY store, as the spread of the coronavirus disease (COVID-19) continues, in Chiswick, London, Britain, April 23, 2020. REUTERS/John Sibley/File Photo

By James Davey

LONDON (Reuters) -British home improvement retailer Kingfisher (LON:) reported a 62% jump in first-half profit as it rode a do-it-yourself (DIY) boom during the pandemic but concerns over inflation and product availability pushed its shares down almost 5%.

The group, which owns B&Q and Screwfix in the United Kingdom and Castorama and Brico Depot in France and other markets, said it was seeing higher than normal cost price inflation arising from certain raw materials and freight costs.

“We expect inflationary pressures to persist through H2 as higher cost inventory is sold through but as demonstrated in H1 we are committed to maintaining our strong competitive price position,” CEO Thierry Garnier told reporters on Tuesday.

He said that despite supply chain disruption the group’s product availability is currently above where it was in January. However, stocks of timber, cement and some products containing semiconductor chips were still below target levels.

Shares in Kingfisher were down 4.9% at 0950 GMT, paring 2021 gains to under 30%, reflecting concern over the inflationary and availability outlook.

Separately on Tuesday British building materials supplier SIG (LON:) warned an industry-wide shortage of materials will likely continue this year.

Kingfisher made an adjusted pretax profit of 669 million pounds ($914.3 million) for the six months ended July 31, beating guidance and the 415 million pounds made a year earlier.

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Many people have discovered or rediscovered DIY during the COVID-19 crisis as they were forced to spend more time at home.

Kingfisher’s sales rose 22.2% on a constant currency basis to 7.1 billion pounds, with like-for-like sales up 22.8%.

The group said it had made a good start to its second half, with resilient demand across all markets, though third quarter to Sept. 18 like-for-like sales were down 0.6% reflecting high numbers a year ago.

Kingfisher raised its second half outlook, forecasting like-for-like sales down 7% to 3% versus previous guidance of down 15% to 5%.

It forecast a 2021-22 adjusted pretax profit of 910-950 million pounds, up from 786 million in 2020-21.

The group also declared an interim dividend of 3.8 pence, up 38%, and plans to return 300 million pounds to shareholders through a share buyback.

Garnier said he had addressed many of Kingfisher’s past issues with “fixes” now complete in the UK and Poland and positive results in France from a strategy to repair ranges.

The group plans to accelerate Screwfix’s expansion in the UK and Ireland, targeting over 1,000 stores from 900 previously, and will open its first Screwfix stores in France in 2022. It also plans to accelerate the expansion of Castorama Poland.

($1 = 0.7317 pounds)

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