Profits at B&Q owner Kingfisher fell nearly a third in the first half of the year as the pandemic DIY boom came to an end, but the company is benefiting from rising demand for home insulation.
The pre-tax profit of Kingfisher, which owns the B&Q and Screwfix chains in the UK, along with France’s Castorama and Brico Dépôt, fell to £474 million in the six months to July 31, down nearly 30% compared to a year earlier.
Like-for-like sales were down 4.1% year-on-year. Kingfisher had a very strong first half last year as DIY stores were allowed to remain open during Covid-19 lockdowns, and the move to work from home led many people to make DIY improvements to their homes and gardens.
Kingfisher CEO, Thierry Garnier, warned of “a more challenging environment” as a recession looms and household budgets are hit by rising energy and food bills.
Shares fell nearly 6% Tuesday morning, making Kingfisher one of the biggest fallers on the FTSE 100.
“The cost of living [crisis] is probably worse in the UK [than France]Garner said. “The French government decided very early on to limit energy prices… We welcome the decision of the new [UK] Prime Minister in this area.”
However, Garnier said there were no clear signs of consumers cutting back on expensive items like kitchens and bathrooms or switching brands to cheaper private label products, and sales and profits remained well above pre-pandemic levels.
“Nothing from recent weeks shows negative trends, but on the contrary, better trends, especially in plumbing, insulation and energy efficiency,” he said.
Garnier said the energy crisis had increased demand for products such as attic insulation and draft excluders. At B&Q, insulation sales increased 110% over the past three weeks from pre-pandemic levels, and was up 82% year over year. Across the group, sales of insulation increased by 70% compared to 2019 and 32% higher than a year earlier.
He said Liz Truss’ first priority should be to support people facing rising energy bills, especially those with lower incomes, but he also stressed the importance of long-term measures to improve home insulation and overall energy efficiency. “The houses in this country are relatively poorly insulated. We need government decisions in this area,” he said.
Kingfisher has sent a number of recommendations to the UK government, including lowering stamp duties for home buyers undertaking energy efficiency work.
In the first half, Garnier said the company had achieved “very resilient” earnings, noting that comparable store sales were still 16.6% above pre-pandemic levels and Kingfisher had gained market share.
He said Kingfisher was back at “pre-pandemic levels for in-store product availability” after supply chain problems led to gaps on the shelves.
Profit margins fell as the company tried to juggle rising raw material costs and supply chain pressures, as well as increased need for promotions, which were suspended during the lockdowns.
Garnier said cost pressures had begun to ease, especially prices of commodities such as metal and plastic, and freight costs. For example, the cost of a container from China has dropped from $14,000 (£12,240) in China to $8,000 now. However, Garnier said the changes won’t lead to lower prices in stores until next year.
But he said Kingfisher, like the broader retail industry, faced economic uncertainty. “We remain vigilant against the more uncertain economic outlook for the second half. We are therefore focused on delivering value to our customers when they need it most.”