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Kingfisher shares: can online transformation boost returns even further?


By all accounts DIY retailer, Kingfisher (LON:KGF) has had a good pandemic. The full year results show that sales increased around 7% to £12.43 billion with profits before tax up 44% from £544 million last year to £786 million.

The UK – which has 1023 out of 1390 stores overall – accounted for 46% of total sales through Kingfisher’s B&Q, Screwfix and Tradepoint stores, and in France, Castorama and Brico Dépôt accounted for 35% of total sales. The firm also announced it is resuming dividend payments with a proposed total dividend per share of 8.25p.

Not surprisingly, the share price rose to 324 on the good news. But in truth the share price had been rising steadily since the beginning of March, from around 266 to 325 at time of writing.

It is not just a case of Kingfisher getting lucky on the back of a pandemic-fuelled DIY craze though. More likely, it is down to a new strategy implemented in June 2020 and still ongoing. Under the leadership of CEO Thierry Garnier who joined in September 2019, the firm is fixing issues from previous years and is transforming the way it does business.

Improving every aspect of the business

Garnier – a Carrefour veteran of 22 years, the last five of which he was in China as CEO of Carrefour Asia – and his team are essentially future-proofing Kingfisher, introducing a raft of new initiatives throughout their European stores. They have ramped up their e-commerce offering while still keeping stores central to the business.

Thanks to Covid-19 and the fact that they had to accelerate some of the programmes, e-commerce has been a major growth area for Kingfisher. They have reported around 10 million new online customers – a recent Kingfisher survey found that during the Covid crisis, 18-34 year olds carried out more home improvement than any other age group. As a result, sales were up 158% last year, which means that they are now 18% of total group sales compared to 8% of total group sales in 2019. Of this, click & collect sales were up 226% and now account for 78% of group e-commerce sales.

Kingfisher is trialling more compact stores and in-store concessions – for example, two B&Q store-in-store concessions within ASDA supermarkets. They are pushing their own exclusive brands (OEBs) which now account for 44% of total sales and are creating a mobile-first experience (around 60% of e-commerce transactions were from mobiles). And at the same time, Kingfisher are turning around the fortunes of their French stores. Upgrading digital capabilities and allowing more local autonomy are just two of the ‘Fix France’ initiatives.

Alongside this, the group has revved up its services side, not just focusing on website and customer satisfaction but bringing back services such as kitchen installations in B&Q and a 3D tool for kitchen and bathroom design. It has also been trialling new tool and equipment hire outlets within TradePoint.

Kingfisher has potential in the long-term

So far this new financial year, Kingfisher have had a good start, with strong reported demand in the UK and France. Since 1 February to 18 March 2021, group like-for-like sales are up 24.2%. And with greater cost and inventory reduction, the company has a stronger balance sheet too. Net leverage is now at 0.9 times compared to 2.0 times in January 2020 and as of 18 March the firm had over £2.2 billion in total liquidity. Kingfisher now has much to play for, but with Europe still in the grip of Covid and an uncertain economic outlook, this one might be best for the long-term.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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