Kingfisher PLC (LSE:KGF) shares fell 14% after the B&Q and Screwfix owner reported annual results and announced a new £300 million share buyback.
For the year to January 2025, the DIY products retailer reported a 1.5% decline in sales to £12.8 billion, with like-for-like sales down 1.7%.
Statutory profit before tax fell 35% to £307 million, while adjusted PBT fell 7% to £528 million.
With free cash flow of £511 million, down 0.6%, the dividend was kept flat at 12.4p.
CEO Thierry Garnier said the group was "in its best operational shape for years", with its various chains in the UK, France and Poland growing market share in all key regions for the first time in over six years.
“We delivered profit and free cash flow in line with or ahead of our initial guidance, with strong delivery against our strategic objectives,” he said, restructuring of Castorama France “progressing” and now being accelerated.
He said the wider market backdrop was a headwind, as expected, while £120 million of costs were removed and inventory cut by over £100 million, but admitted that government budgets in the UK and France have "raised costs for retailers and impacted consumer sentiment in the near term".
Guidance for the new financial year was for adjusted PBT of £480-540 million and free cash flow of £420-480 million, along with a statement that the board remains “confident about the medium to longer-term outlook for the sector” and is still targeting free cash flow of over £500 million a year in the following year.
Market reaction
The big share price fall reflects almost every key figure apart from gross margins being in reverse over the year and guidance for the new year includes a wide profit range, with "the bottom end being worse than that achieved in the past year", says Russ Mould, head of investment at AJ Bell, noting that the B&Q owner is one of the most shorted stocks on the UK market.
Meanwhile, Third Bridge analyst Yanmei Tang said while Kingfisher's management have made cost control measures a top priority, "over-prioritizing savings at the expense of growth could be detrimental in the long term" to the group's competitive position.
She adds that Kingfisher’s marketplace strategy, while "conceptually strong", has "suffered from poor execution" and the group's shift away from the 'One Kingfisher' strategy has "introduced inefficiencies in procurement, leading to higher prices for customers".
"By moving towards a more localized approach, the company has lost the volume-based cost advantages it once had, making it harder to compete on price."
Mould added that hedge funds have been betting that the FTSE 100 retailer's problems can’t be fixed in the current fragile retail environment.
"They have been right so far, with the shares slumping even further on its latest set of results."
He added: “It’s all very well starting the results by saying its market share grew in all regions for the first time in over six years and launching a new share buyback programme. Investors aren’t fooled – Kingfisher is broken and something has to change fast.
“If Wickes and DFS can show resilience in a tough market, there is no excuse for Kingfisher not to keep its head above water.”
** Update: Adds analyst comments **