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B&Q owner Kingfisher rides high on pandemic home improvement boom

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B&Q owner Kingfisher rides high on pandemic home improvement boom
'Many families have spent months redirecting money into home improvements, especially home offices, outdoor spaces, and garden sheds,' experts said. Photo: Getty

B&Q and Screwfix owner Kingfisher (KGF.L) was riding high on a wave of pandemic DIY in its second half results, as like-for-like sales rose more than 22%. 

It also saw transaction volume and average basket size up on a one-year and two-year basis.

The boom in sales is partly because this time last year there were still significant store closures in certain regions — but there has been resilient demand across all markets, Kingfisher said.

The company increased its interim dividend by almost 40% and will buy back £300m ($410.6m) of its shares.

Shares declined around 5% in early trade in London following the news. 

Kingfisher's shares fell on Tuesday in London. Chart: Yahoo Finance UK
Kingfisher's shares fell on Tuesday in London. Chart: Yahoo Finance UK

"Before COVID-19 double-digit growth in the DIY space was something of an anomaly, however a few months on and growth remains stronger than ever," said Ross Hindle, retail sector analyst at Third Bridge. 

“A structural change towards working-from-home has made people look at their homes differently. Many families have spent months redirecting money into home improvements, especially home offices, outdoor spaces, and garden sheds."

Its French segment turned from a weak to a bright spot, with retail profit more than doubling compared to the same period last year, with the effort to restore the discount DNA to the Bricot Depot chain clearly reaping rewards.

Read more: FTSE rises as UK public sector borrowing sees second highest August on record

In the third quarter, demand overall dropped back a little, by 0.6%, with the bad weather putting people off starting outdoor projects and making purchases, but the DIY craze shows little sign of waning with like for like sales up 16% compared to 2019.

The DIY giant was not immune to the supply chain issues which have plagued many other UK industries in over the last few months. 

"Although higher shipping costs and bottlenecks at major ports don’t look like they are going to ease any time soon and will remain a challenge, so far the company has navigated the shortage of raw materials and drivers adeptly," said Susannah Streeter, senior markets analyst at Hargreaves Lansdown. 

Prices are going up more steeply than usual but so far Kingfisher has managed to limit inflationary pressures on the business, though concerns will remain over whether it will be able to continue to do so, if the supply chain crunch continues into next year.

Read more: UK COVID rebound stalls amid recruitment and supply chain issues

Kingfisher doesn’t expect sales to dwindle as much as previously thought for the second half of the year — expecting a drop off of between 7% and 3% compared to a fall of 5% to 15% — which when compared to the same period in 2019 represents a sales jump of around 9% to 13%.

"The big questions for Kingfisher are: How do they retain the newfound consumers they picked up during COVID and how do they get millennials more comfortable with DIY? Kingfisher's investment into digital is therefore doubly important as they seek to capture the data and the hearts of young people who don't see DIY as something relevant," said Hindle. 

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