Kingfisher’s real test is yet to come

Shares in Kingfisher, the retail group that owns B&Q, have been boosted by news that the “cost of living crisis” hasn’t prevented “resilient demand” for DIY-related products, says Jasper Jolly in The Guardian. While sales were lower between February and April compared with last year, they are still close to the “elevated levels” seen during the pandemic, when DIY stores were one of the few outlets permitted to remain open, and 16% higher than during the same period three years ago.

Not so fast, says Emma Powell in The Times. True, there are signs that some “lockdownera trends” are persisting, with “greater home working and an active housing market” helping Kingfisher to hold on to higher sales. However, while its shares have had a softer landing than other pandemic winners, they have still declined by a quarter this year, and there could be more pain to come. Kingfisher is now the fifth most-shorted stock in London, suggesting that many investors think that higher mortgage costs and the rapidly rising cost of living will cool the housing market and demand for DIY products.

If a further slowdown ends up knocking sales below prepandemic level, this will provide a “revealing test” of the strategic changes made by CEO Thierry Garnier, says Lex in the Financial Times. Still, it looks like Garnier’s focus on more customer choice and the unwinding of the centralisation put in place by his predecessor seems to be paying off, as shown by the fact that B&Q has gained market share. What’s more, the firm is also “financially stronger”, with leverage below 2019 levels even after a new £300m buyback.