Kingfish posted a 14.7% fall in first-half pre-tax profit to £375 million, while analysts were anticipating £386 million. The French business was the underperformer of the group, while the British and Polish operations performed well. Gross margin dropped by 40 basis points due to logistics and stock inefficacies largely in France.
The group revealed a shake-up in management as Henri Solere will take over as head of Offer and Supply Chain Organisation. The firm expects to grow gross margin after the clearance in 2018/2019. The CEO, Veronique Laury, acknowledged that transformations are ‘tough’. The French unit should be better positioned for the second-half, as the company has improved pricing and now has better communications with customers.
The retailer had a broadly positive second-quarter due to the warmer weather. The figures looked extra impressive when compared with the weak first-quarter performance. Trading in the first three months of the year was hit by the ‘beast from the east’. The weakness in the French division spanned both quarters so it’s not just the weather that is holding the operation back. The French unit has been dragging on the group for some time. Earlier this month, it was reported that Christian Mazauric, the head of the B&Q UK & Ireland will replace Marc Tenart as head of the French division.
Last month, Kingfisher posted a 1.6% jump in second-quarter like-for-like sales, and that was a major improvement on the 4% decline that was endured in the first three months of the year. The B&Q business benefitted from barbeque and garden furniture sales on account of the hottest summer on record. The screwfix business caters more for people in the trades industry, and the division posted a 5.5% rise in revenue on a LFL basis. The UK construction PMI and construction output reports have registered higher readings in recent months in comparison with the start of the year, and that should bode well for the wholesale side of the business.
The firm is half way through its five-year turnaround plan whereby it is cutting costs and promoting online sales. The group might find it difficult to achieve its turnaround plan given the poor performance this year. The retail sector as a whole is undergoing a major transformation, and e-commerce is eating into store sales, and the firm will need to keep up with the trend or risk getting left behind.
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