(lse: kgf): strong top-line performance in 2q17 2q17 by... · • uk-based home-improvement...
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1 DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
AUGUST18,2016
(LSE: KGF): Strong Top-Line Performance in 2Q17 • UK-basedhome-improvement retailer, Kingfisher, reported total sales increased
by 3.2% at constant currency in 2Q17, with group comps up 3.0% at constantcurrency.SolidgrowthwasdrivenbystrongperformancesintheUKandPoland.
• The companygrewcomparable salesby7.2% in theUKand Ireland,but Frenchcompsfell3.2%atconstantcurrency.
• Kingfisherwillreportfull1H17resultsonSeptember20.
2Q17SALES
Kingfisherreportedan8.4%increaseintotalgroupsalesin2Q17,whichendedJuly31;atconstantcurrency.Itgrewgroupsalesby3.2%andcomparablesalesby3.0%.Groupperformance was underpinned by strong comparable sales growth in the UK, IrelandandPoland.
Kingfishermanagementnotedtheyhadcompletedthefirm’sdisposalofits30%interestin B&Q China in the quarter, which yielded net cash proceeds of £63 million.Managementalsonoted£150millionhadbeenreturnedtoshareholdersviabuybackssincethelastyearend.
PERFORMANCEBYSEGMENT
The company posted 5.1% growth in total sales in the UK and Ireland. At constantcurrency,totalsegmentsaleswere+5.0%andcompswere+7.2%.
• B&QUKandIreland,thecompany’sconsumer-focusedbanner,grewtotalsalesby0.5%, sales at constant currency by 0.3% and comps at constant currency by animpressive5.6%.Storeclosuresboostedcompsbyapproximately200basispointsbytransferringsomesalestoremainingstores.Seasonal rangeswerestrong,withcategorycompsup9.6%.
• Screwfix grew sales by 24.5%, both as reported and at constant currency, andcomps at constant currency by 13.3%. The company noted new and extendedranges helped boost sales. We expect the maturation of its fast-growing estateflatteredcomps.
Allnumbersquotedinthefollowingcommentaryareatconstantcurrency.
France faredpoorly,with total salesdown1.4%andcompsdown3.2%.Thecompanynoted the market was affected by industrial action, wet weather and “a morechallengingenvironment.”
• Total sales fell 2.2% at consumer-focused chain, Castorama, and its comps weredown3.3%.Poorweathermeantseasonalcategorieswereweak,andcompsweredown4.3%.
• Trade-focused BricoDépôt performed better at the top line; sales edged down atotalof0.3%andfell3.1%onacomparablebasis.
Kingfisherperformedstronglyinitsotherinternationalmarkets:
• Total sales grew by 10.5% and comps by 7.3% in Poland, due to a, “currentlysupportivemarket,”andsuccessfulnewranges.Seasonalrangesturnedincompsof+10.7%.
2 DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
AUGUST18,2016
• Russiansalesgrewby3.4%intotalandby5.8%onacomparablebasis.• Spanishsalesincreasedby6.6%intotalandby4.3%onacomparablebasis.
Thecompanystatedithadnotseenanyevidenceofanimpactfromthecountry’svotetoleavetheEU.
UKINCONTEXT:RETAILSALESDATA
UKretailsalesdata,alsopublishedtoday,showsDIYandhardwarestores’salesgrewby0.6%onaverageinMay,JuneandJuly,withnegativegrowthinJuneandJuly.Kingfisher’stotalUKandIrelandsalesgrowthof5.1%thereforerepresentssubstantialmarket-sharegains.B&Q’stotalgrowthof0.5%broadlytrackedthesectorandScrewfix’s24.5%surgeinsalesonthebackofstoreopeningsindicatesaleapinUKmarketshare.
GUIDANCE
Kingfisherwillreport1H17resultsonSeptember20.Thecompanyofferedthefollowinggrossmarginguidancefor1H17:
• UK grossmargin is expected to be down100 basis points and reflects the stronggrowthatScrewfixandB&Qstoreclearanceduetoclosures.
• Francegrossmargin isexpected tobeup50basispointsdue to lesspromotionalactivity.
• Polandgrossmarginisexpectedtobeup150basispointsduetostrongtrading.
Frenchoperatingcostswillincreasebyaround£10millionin1H17,duetocertainlevies;however,thecompanyexpectsthistobeoffsetbyacorrespondingreductionin2H16.
Kingfisher’s Chief Executive Officer, Véronique Laury, said the company remained“cautiousontheshort-termoutlook.”
For FY17, analysts expect Kingfisher to post revenue growth of 6.0% and net profitgrowthof14.7%,andtoturninGAAPEPSof21pence,flatonFY16.
3 DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
AUGUST18,2016
DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comJohnMercerSeniorAnalyst
TomPearceResearchAssistant
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