Profits are up but sales are down
Kingfisher expects to make more money. The group has upgraded its profit forecast. Yet its main UK brand is struggling. Sales at B&Q are falling. The numbers present a contradiction. The FTSE 100 company announced on Tuesday that it anticipates pre tax profits for the year will now land somewhere in a range between £595 million and £635 million. That is a substantial sum. It is also an increase on last year's reported profit of £560 million. The new guidance is a revision upwards, showing increased confidence from the boardroom since the last update to the market.
This optimism is not reflected on B&Q’s shop floors. The opposite is true. In the company’s second quarter, like for like sales in its United Kingdom and Ireland business dropped by 1.8 per cent. This metric compares sales at stores that have been open for more than a year, providing a direct view of underlying trading performance away from the effects of new shop openings. A fall of 1.8 per cent shows a definite cooling in customer demand for DIY products over the period. It points to a problem.
The situation is worse for more expensive purchases. Much worse. Sales of so called big ticket items did not just fall. They plunged. The drop was 8.1 per cent. This specific category, which often includes items like new kitchens or large garden structures, saw a particularly severe decline during the second quarter. An 8.1 per cent collapse in this part of the business suggests consumers are actively choosing not to commit to large, discretionary home improvement projects right now. This is a significant indicator. It is a warning sign.
This leaves a central question. How can a group whose main consumer facing brand is seeing sales shrink, and seeing demand for its most valuable items collapse, simultaneously tell the stock market it expects to make more profit than previously thought? The figures appear to be moving in opposite directions. Kingfisher’s confidence on profit sits uneasily next to B&Q’s poor quarterly sales data. Understanding this apparent paradox is key to understanding the current state of the British home improvement sector and Kingfisher's place within it.
The engine room is called Screwfix
The answer has a name. Screwfix. Kingfisher, a constituent of the FTSE 100 index, owns both B&Q and its very different stablemate. They serve separate worlds. B&Q targets the general public, the weekend DIY enthusiast, the household making a discretionary choice about a garden project. It is this customer who is pulling back, evidenced by the 1.8 per cent fall in like for like sales and the much sharper 8.1 per cent drop in big ticket purchases. They are not spending.
Screwfix has another customer entirely. It is built for the trade. Not for browsers. Its catalogues and small format depots are designed for trade professionals who need specific components, often at short notice, to complete a paid job. This is not leisure. They are buying for work. This distinction is everything. It explains the divergence.
The giveaway is the profit upgrade. A company does not raise its guidance from a range of £565 million to £625 million up to a new target of £595 million to £635 million if its main public facing business is in retreat. It cannot. The clear implication from the 22 September announcement is that the Screwfix part of the group is experiencing formidable growth. That growth is so strong that it not only absorbs the weakness shown in B&Q’s quarterly numbers but powers the entire group towards a higher overall profit for the year. Kingfisher’s engine room is not the sprawling orange fronted shed on the retail park. It is the trade counter.
This reveals a fundamental split. The professional tradesperson is evidently busy, with enough work lined up to sustain a high demand for essential materials. Their spending is non discretionary. It is a business cost necessary to generate their own income. The B&Q shopper, in contrast, is spending their own disposable income on projects that can be postponed. Many are waiting. One customer base is thriving. The other is becoming cautious. Screwfix masks the B&Q slump.
Heatwaves and anxious households
The reasons for B&Q’s poor performance are twofold. One is simple. The weather was to blame. The company specifically cited summer heatwaves as a reason for its troubles, a factor that directly impacts retailers with a heavy focus on seasonal and outdoor products. People do not buy garden furniture in a heatwave. They do not start ambitious new planting projects. They certainly do not spend hours wandering the aisles of a vast warehouse when the temperature is climbing. Hot weather drives people indoors, away from the very activities that B&Q’s product lines are designed to support, leading directly to the 1.8 per cent fall in like for like sales across its UK and Ireland stores in the second quarter. The sun was too strong. The sales were not.
But the weather is not the whole story. It cannot be. A heatwave might explain a dip in sales of barbecues and lawnmowers, but it does not account for the much more alarming figure buried in Kingfisher’s update. This is the big one. Sales of so called big ticket items did not just fall. They plunged. The drop was 8.1 per cent. This number points to a problem far deeper than a few weeks of sunshine. Big ticket items are the major projects. They are the new kitchens, the bathroom renovations, the significant structural changes to a home that require thousands of pounds and months of planning. These are not impulse buys. They are serious financial commitments, undertaken by households feeling secure and optimistic about their economic future.
A drop of 8.1 per cent signals that this optimism is gone. It is evaporating. The figure reveals a deep seated anxiety among British consumers, who are looking at their finances and deciding to put major projects on hold indefinitely. The choice to delay a kitchen refit is not a response to the weather. It is a response to economic uncertainty. This is the caution of a household looking at its budget and choosing to save, not to spend. So while the heatwave provided a difficult trading backdrop for B&Q’s seasonal ranges, a more profound consumer retreat is behind the collapse in spending on its most expensive lines. The heat kept people out of the garden. Anxiety is keeping them out of the showroom.
A tale of two retailers
This divergence tells a tale of two retailers. It is a story of two different Britains. Kingfisher is a company with two distinct faces, one turned towards the amateur DIY enthusiast and the other towards the professional tradesperson. B&Q serves the public. Screwfix serves the trade. This fundamental division within the group’s structure is the only way to explain how it can absorb a significant sales slump in its most famous chain while simultaneously raising its profit forecast for the entire year. The company is operating in a two speed home improvement market. One part is stalling. The other is still running hot. The result is a paradox, where poor results in one area are more than cancelled out by excellent results in another, allowing Kingfisher to predict pre tax profits as high as £635 million.
The customers are completely different. Their motivations are different. B&Q’s clientele are households making discretionary choices about their own living spaces, the kind of choices that are easily postponed when economic anxiety begins to bite. They are the source of the 8.1 per cent collapse in spending on big ticket items like kitchens and bathrooms. The Screwfix customer is not making a discretionary choice. They are a professional. They are a sole trader, perhaps a small business, buying essential materials not for their own home but to complete a job for a client. Their purchases of wiring, pipes, plasterboard and power tools are driven by the demands of their order book, a pipeline of work that was commissioned months ago when household finances may have felt more secure. The group's profit upgrade is a clear signal. It indicates that this trade demand has remained exceptionally robust, creating enough profit to paper over the growing cracks appearing in B&Q’s consumer focused business.
This split paints a picture of an economy with a significant lag. The professional is busy today. The plumber and the builder are still buying supplies from Screwfix to finish jobs that were booked before consumer confidence evaporated. But the data from B&Q is a forecast of their future. The collapse in people committing to large scale renovation projects means the pipeline of new work is starting to shrink, which could eventually hit the trade professionals who have so far been insulated from the downturn. For now, a disconnect persists. The people doing the work are still busy. The people paying for the work are pulling back. It is a fragile equilibrium, one where the momentum from past economic activity is propping up one half of the market while the reality of current consumer sentiment is dragging down the other. The tradesperson is thriving on yesterday’s decisions. B&Q is suffering from today’s.
How Kingfisher found an extra £30 million
The mathematics of the upgrade are simple. The company has found an extra £30 million. Kingfisher told the stock market its previous forecast for pre tax profit, a range between £565 million and £625 million, was too low. The new guidance is for a figure between £595 million and £635 million. That is an improvement at both the bottom and the top of the expected range, and it puts the group on course to comfortably beat the £560 million profit it posted last year. The question is where this new money came from. The answer lies in the difference between sales and profit.
Profit is not the same as revenue. A company can increase its profits even while the sales at one of its biggest divisions are falling, as they are at B&Q. This happens through the careful management of costs. Every penny saved on sourcing products, on logistics, on staffing or on head office expenses drops directly to the bottom line. It becomes profit. A rise in the profit forecast while sales are weak in one area is a clear sign that a business is becoming more efficient at turning its revenues into actual cash. This requires discipline. It points to a management team focused intently on the small details of its operations, from negotiating better terms with its global suppliers to optimising the delivery routes for its fleet of lorries.
This operational grip is the key. The sheer volume of transactions processed by Screwfix means that a tiny increase in the profit margin on each item sold can have a colossal impact on the group’s overall financial performance. An improvement of a fraction of a per cent on the thousands of different products it sells, from plumbing fittings to electrical wiring, multiplies into a sum large enough not only to cancel out the weakness at B&Q but to leave a surplus. A surplus of £30 million. That is the mechanism behind the upgrade. Kingfisher is making more money from every pound that trade customers spend at Screwfix, and it is making enough to absorb the impact of households spending less on new kitchens at B&Q.
The focus now is on autumn
The focus now is on autumn. The next trading update is critical. Investors will be watching closely for any sign that the trends of the summer have changed, especially the sharp divergence between the group's two main businesses. The crucial question for the board will be whether B&Q can begin to close the performance gap with its trade focused stablemate, Screwfix, or if the DIY chain's slump will continue. The summer heatwaves have passed. That excuse is gone. Now the group must prove B&Q can recover as the seasons change and household spending patterns shift towards indoor projects.
B&Q's problem is specific. It is about large purchases. The 1.8 per cent fall in like for like sales over the second quarter hides a much more serious issue, which is the 8.1 per cent collapse in big ticket spending. This is not about shoppers buying fewer tins of paint. It points directly towards households delaying or cancelling expensive plans for new bathrooms and kitchens, projects which form the bedrock of B&Q’s profitability. People are waiting. For B&Q to reverse this trend, it needs consumers to feel confident enough to commit to projects that cost thousands, not hundreds, of pounds.
Screwfix is the group’s engine. Its performance has been exceptional. It powered the entire company forward, dragging the group towards a higher profit forecast even as B&Q acted as a brake on progress. But momentum can be lost. The question for the chief executive Thierry Garnier is whether the demand from trade professionals, such as electricians, plumbers and builders, will remain as robust through the autumn. Its fate is tied to theirs. If their order books stay full, Screwfix thrives. If work dries up, the foundation for the group’s entire profit upgrade begins to look fragile.
Ultimately, it comes down to the numbers. Kingfisher has set a new target. The board now expects to deliver a pre tax profit of between £595 million and £635 million, a figure which would comfortably beat last year’s £560 million result. This is the promise made to the City. Meeting it is the primary test. Failure to hit this new guidance would damage management's credibility and suggest the efficiencies driving the upgrade are not sustainable. The market would not be forgiving. All eyes are now on that final figure. Every trading statement between now and the year end results will be measured by one metric. Whether Kingfisher is still on track.
Sources. Evening Standard: Kingfisher delivers profit upgrade despite flagging B&Q sales. City AM: B&Q sales slip but owner Kingfisher lifts profit target.
Analysis. Drafted with AI assistance from the sources listed above and reviewed by an editor before publication. Jnews links to the organisations it writes about.
