What to do during a pandemic? B&Q owner Kingfisher has done well out of the pandemic as consumers have found reasons and savings to tart up their homes and gardens. Q3 numbers suggest the trend has not waned, but it may not persist at these levels for much longer. Total group sales rose 17.6 per cent to £3.5bn, with like-for-like sales +12.6 per cent. Home doer-uppers were the driver with B&Q LFLs +24 per cent on constant currency basis, whilst trade desks at Screwfix saw sales at +12.8 per cent on the same basis. Total UK & Ireland sales +19.9 per cent compared with +19.2 per cent in France, +7.5 per cent in Poland, +10.6 per cent in Romania and +18.1 per cent in Iberia. Whilst uncertainty over Covid-19 and the impact of temporary lockdown restrictions in most of its markets continue to limit the near-term visibility, management feel that consumers’ “renewed focus on homes” is supportive for sales. Whilst this may be true in the near-term, shares have already handsomely since the March lows and sales momentum is unlikely to continue through 2021 as vaccines enable a return to more normal activities. KGF may have experienced a significant pull-forward in demand that won’t continue. Shares declined almost 4 per cent in early trade before paring losses to track –2 per cent.
Meanwhile, it’s well understood that kicking our heels at home has boosted online purchases and Royal Mail has achieved a milestone in its history as a result of the pandemic, though the trend has been going in this direction for many years. For the first time, parcels revenue at Royal Mail exceeds letters revenue, representing 60 per cent of total revenue, compared with 47 per cent in the prior period. Parcel volumes rose 31 per cent as letter volumes declined 33 per cent. Revenues at the GLS rose 21.7 per cent, with an operating margin of +8.9 per cent and profits +84.4 per cent to £166m. Royal Mail revenues are now projected to be £380m to £580m higher year on year, but the mix change costs are increasing to £210 million. The results indicate Royal Mail is moving in the right direction in terms of the shift to parcels, and point to the large opportunity in this space that the company has been a bit slow to adapt hitherto. But it also points to some near-term cost implications from the mix change. Shares rose over 6 per cent in early trade.
Finally, the demon drink has been an important salve and Naked Wines has prospered from its direct to consumer model. First half revenues surged 80 per cent year-on-year to £157.1m. New customers strong, with active ‘Angels’ base +37 per cent to 757k. The company is now the largest direct to consumer wine merchant in the USA and it is doing a good job of scaling up the operations to respond to the demand in its core markets with warehouse capacity +104 per cent. Fixed costs as percentage of revenues –5 percentage points is another positive. Outlook upgraded for sales growth to achieve 55-65 per cent this year. Shares rose 7 per cent in early trade.