In key news on UK stocks, European home improvement retailer Kingfisher (GB:KGF) reported a 22.3% decline in its statutory pre-tax profit to £475 million in Fiscal Year 23/24 (ended January 31, 2024), hit by macro pressures. The company’s sales declined by 3.2% on a like-for-like basis to nearly £13 billion. Kingfisher mainly faced a tough consumer backdrop in France and Poland.
After initially trending lower, KGF stock ended higher by nearly 3% on Monday, as investors appreciated the measures the company outlined to streamline and simplify its business in France. The retailer is mainly focused on enhancing the profitability of Castorama France. Kingfisher owns the B&Q and Screwfix brands in the UK and the Castorama and Brico Depot brands in France and other international markets.
Plus, the retailer maintained its full-year dividend at 12.40p and announced a new £300 million share buyback plan.
KGF Faces Continued Macro Headwinds
Aside from the impact of macro pressures on consumer spending, Kingfisher’s FY23/24 profits were hurt by higher wages, energy costs, and technology costs.
Management cautioned that a weak housing market and muted consumer confidence in France would continue to weigh on its business. Meanwhile, conditions in Poland are expected to gradually improve in the current Fiscal Year.
Coming to the UK and Ireland segment, repairs, maintenance and existing home renovation are expected to remain strong. That said, the company highlighted the potential impact of persistent macro uncertainties and the lag between housing demand and demand in the home improvement market.
Overall, Kingfisher expects FY24/25 adjusted profit before tax to be between £490 million and £550 million, reflecting a decline from an adjusted pre-tax profit of 568 million in the previous year. Also, free cash flow is expected to be in the range of £350 million to £410 million, down from £514 million in FY23/24.
Is Kingfisher Stock a Good Buy?
Following the results, Barclays analyst James Anstead reiterated a Buy rating on Kingfisher stock with a price target of 300p. The analyst noted that the company’s results were in line with expectations. He added that Kingfisher’s plan to enhance the profitability of French business is “welcome, but may take some time.”
Analysts are sidelined on KGF stock, with a Hold consensus rating based on two Buys, two Holds, and two Sells. The average Kingfisher share price target of 236p implies a possible downside of 1.6%
