Kingfisher, the parent company of B&Q, reduced its full-year profit expectations, forecasting a £31 million impact from increased national insurance contributions for employers. This announcement led to a 13% drop in the company’s stock prices.

The DIY retailer revised its annual pre-tax profit forecast to a range of £510 to £540 million, down from earlier expectations of £510 to £550 million, and significantly below the £568 million reported in the previous fiscal year ending January 31.

In addition, Kingfisher highlighted that the upcoming rise in employers’ national insurance from 13.8% to 15% in April 2025, as announced in the recent budget, will result in an extra £31 million expense. Changes to tax regulations in France are expected to further impact the group by an additional £14 million.

Retailers have cautioned that the increase in national insurance contributions could lead to higher prices and a slowdown in employee recruitment. Kingfisher, which employs around 34,000 people across its Screwfix and B&Q outlets in the UK, has aimed to bolster its business under CEO Thierry Garnier since 2019.

Garnier noted that, despite improvements in August and September, October revealed increased consumer uncertainty in both the UK and France, particularly in response to recent government budget announcements. The FTSE 100 company recorded a trading slowdown for the three months ending October 31, with like-for-like sales declining by 1.1%, against analysts’ expectations of a smaller 0.2% decline. Kingfisher’s quarterly sales totaled £3.22 billion, falling short of the anticipated £3.27 billion. Sales of higher-priced items were reported as “remaining soft”.

In the UK and Ireland, the retailer’s quarterly sales reached £1.62 billion, reflecting a modest 0.4% increase year-on-year. Kingfisher mentioned plans to counterbalance the impacts of the minimum wage rise through operational cost reductions and efficiency improvements.

However, the company faced challenges in France, where like-for-like sales dropped by 4.3%, significantly worse than the expected decline of 2.6%. The disappointing results were attributed to weak consumer sentiment and unfavorable weather conditions. Despite this, Kingfisher is progressing with plans to restructure and modernize the underperforming Castorama stores in France. Earlier this year, the group indicated it would evaluate the future of one-third of its struggling Castorama stores following substantial drops in sales.

Kingfisher operates over 2,000 locations across eight countries, with the UK and France representing its largest markets. It also includes brands such as Koctas in Turkey.

Trade has shown signs of improvement in the fourth quarter, with like-for-like sales showing a smaller decline of 0.5% in the three weeks leading up to November 23. The company experienced a surge in demand for DIY goods during the pandemic lockdowns, with profits exceeding £1 billion in the year ending March 2022 and share prices reaching over 370p. However, overall demand has since waned due to the ongoing cost of living crisis and increasingly challenging comparisons.

Richard Chamberlain of RBC Capital Markets remarked, “Kingfisher has established a stronger digital and trade offering in the UK, which it can now expand into other markets. We anticipate that DIY trends may remain resilient as consumers seek to save money and enhance their homes.” Shares in Kingfisher dropped by 39.5p, or 13.4%, to 255.5p during morning trading on Monday.

Screwfix Continues Strong Performance

Screwfix, focused on supplying builders, plumbers, and electricians, emerged as a standout performer for Kingfisher in the third quarter. The business reported sales of £681 million, an increase from £651 million in the corresponding period last year.

Kingfisher’s overall performance in the UK and Ireland for the three months ending October 31 was primarily bolstered by strong growth from Screwfix, which recorded a 1.8% rise in like-for-like sales during the third quarter, driven by increased sales volume.

The FTSE 100 group indicated that categories in building, joinery, and outdoor products performed well over the three-month period, fueled by robust demand from trade clients. Additionally, Screwfix expanded its footprint with the opening of six new stores in the UK and Ireland during the third quarter.

Thierry Garnier noted that Screwfix had captured “particularly strong market share gains.” The group also extended Screwfix’s presence into France to enhance brand visibility, with one new store inaugurated during the third quarter, raising the total number of stores in France to 26.

Kingfisher stated that its Screwfix outlets in France are experiencing “encouraging sales trends” and have witnessed an increase in their customer base compared to last year.

Richard Chamberlain also commented that the investment bank is “interested in the growth potential of Screwfix, though achieving critical mass and profitability outside the UK will likely require time.”