Kingfisher thrives in lockdown

Online sales, a key area of focus for Kingfisher, now make up nearly a fifth of overall trading, compared with 7 per cent in the same period last year. B&Q sales edged up 3.7 per cent to £1.84bn, despite group sales bottoming out in April at around three-quarters beneath last year's comparator. Cost reductions and a tight grip on working capital management helped boost profitability and Kingfisher’s free cash flow, which ballooned by £838m to £1bn. Revisions to supplier terms helped drive a working capital inflow of £656m. New supplier agreements, combined with strong sales in the second quarter, pushed Kingfisher’s inventories down by £300m.

Kingfisher is “still too complex”, the company says. Coronavirus hastened the launch of a new B&Q delivery service from stores, which accounted for more than half of the brand’s home deliveries. Home delivery and click and collect are playing a more prominent role in other parts of the business, too, including Iberia, where the retailer has reversed its decision to leave the market.

And Kingfisher has also paused and stopped a number of initiatives. Its capital expenditure nearly halved to £87m in response to the crisis, but the retailer has also cut back on reviews of its product ranges and scrapped non-critical IT projects. The group has achieved cost savings through rent renegotiations on seven B&Q stores, which yielded an aggregate net reduction of 20 per cent. In the UK and France, much of Kingfisher’s quarterly up-front rental payments have become monthly.

Consensus estimates are for earnings per share of 20.1p for Jan 2021, falling to 19.8p in FY2022.