High Street fears rise as B&Q reveals fall in DIY sales

B&Q owner Kingfisher revealed ‘resilient’ sales (Paul Faith/PA) (PA Wire)

Fresh fears for the High Street emerged today when Kingfisher reported a drop in sales which could indicate the lockdown DIY boom is over.

With the company behind B&Q saying demand is resilient and on track to hit profit targets for the year of £770m, hedge funds are betting aggressively against the company.

While CEO Thierry Garnier is confident enough about the future to launch a £300million share buyback, the mood music is uncomfortable.

On a like-for-like basis, sales, the most watched metric, fell 5.4% in the first quarter.

Garnier insists the company has retained “a significant proportion of the sales increase during the pandemic”.

In 2019, Kingfisher reported a slump in profits that saw 65 stores closed and 3,000 jobs lost.

Shares of Kingfisher rose 5p to 252p today, but are down 30% this year. The stock is one of the “shortest” in the FTSE 100 as hedge funds bet on further decline.

Kingfisher said it was “aware of the increased macroeconomic and geopolitical uncertainty that has emerged since the start of the year”, but added that it will look to increase its market share.

Opponents believe inflation, supply chain issues and the public’s desire for holidays and other experiences will affect sales on the already struggling high street.

A note from broker City Liberum today was brutal. It said.

“The macroeconomic outlook has deteriorated…equity prices have crashed…consumer spending is at an all-time low. The erosion of real incomes and the decline in the standard of living are not temporary. »

He “took a knife” to earnings forecasts for retailers of 20% and warned of “bombarded valuations”. He likes some retail stocks – Pets at Home and Superdry – but thinks ASOS, owner of Primark ABF and boohoo should be avoided.

Kingfisher says it manages “inflationary pressures” effectively and says the DIY and DIFM (do-it-for-me) sectors are doing well at the moment.

Garnier said, “Our product availability is now very close to ‘normal’ levels across all of our banners, and we continue to deliver value to our customers through our own exclusive brands and competitive pricing.

However, rising mortgage costs look set to leverage consumer spending.

Garnier said last month that “home improvement is not a bad place to be in crisis.” City analysts fear DIY projects will become a luxury to be delayed as consumers worry about energy and food costs.

Neil Wilson of Markets.com said: “Although the 3-year comparable data was good and revenue was in line with expectations, the UK comparable data was quite poor compared to last year and suggests that the DIY business is down at a rapid pace Spare rooms have been fitted out and garden offices built, now everyone is splurging on vacations and trips, there is no money available for home renovations.Kingfisher is a classic pandemic winner that has seen a surge in demand and is now seeing declining growth.The key will be the health of the housing market going forward and that doesn’t look too promising.

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