Investing.con -- Shares of Kingfisher (LON:KGF) dropped more than 12% on Monday after the company released a trading update that revealed weaker-than-expected performance for the third quarter.
The retailer, which owns brands like B&Q and Screwfix, reported a decline in like-for-like sales and missed analysts' forecasts for both overall sales and LFL growth.
For Q3, Kingfisher reported total sales of £3.2 billion, slightly below the consensus estimate of £3.3 billion.
The company's LFL sales, which measure revenue from stores open for at least a year, fell by 1.1% year-on-year, also missing the expected drop of 0.2%. This overall softness was felt across most of its key markets.
In the UK & Ireland, sales came in at £1.617 billion, under the consensus of £1.634 billion.
LFL sales in the region grew by just 0.4%, falling short of the expected 1% increase. B&Q, the company's largest UK brand, saw its LFL sales fall 0.6%, while Screwfix managed a modest 1.8% growth, which aligned with market expectations.
"We are also attracted to the growth potential of Screwfix, albeit it will likely take time to gain critical mass and become profitable outside the UK," said analysts at RBC Capital Markets in a note.
In France, Kingfisher's sales of £967 million were also below the £994 million anticipated by analysts, with LFL sales in the region tumbling 4.3%, much worse than the forecasted 2.6% decline.
Both of Kingfisher’s French brands, Castorama and Brico Depot, saw their LFL sales decline more sharply than expected, with drops of 4.7% and 3.7%, respectively.
Sales in other international markets were more stable, with revenues of £637 million roughly in line with forecasts.
However, Poland's performance was weaker than anticipated, with LFL sales falling by 0.4% compared to a consensus forecast of 0.3% growth.
"We see potential for DIY trends to be fairly resilient, helped by consumers looking to save money and to improve their homes although we appreciate the operating leverage of Kingfisher to LFL sales forecasts," RBC said.
The company also said that October proved to be a particularly difficult month, with weakened market conditions in both the UK and France.
The sluggish performance was attributed to consumer uncertainty, particularly around government budgets and broader economic conditions.
While November showed some improvement, with a more moderate 0.5% decline in LFL sales, it was clear that the company faced significant headwinds.
Due to this, Kingfisher narrowed its profit before tax guidance for the full year, reducing its forecast range from £510 million-£550 million to £510 million-£540 million.
However, the company maintained its full-year free cash flow guidance. Despite the challenging outlook, Kingfisher reiterated its plan to complete a £300 million share buyback program by March 2025.
Going forward, Kingfisher warned of additional challenges in the coming year, including a £31 million headwind from higher national insurance costs in the UK and a £14 million increase in social tax in France, partly driven by a higher French tax rate.
Interest costs, while slightly lower this year, are expected to rise by £10 million next year, further adding to the pressure on profits.