Investing.com -- Kingfisher Plc (LON:KGF) shares tumbled 12% on Tuesday after the home improvement retailer reported a 35% drop in annual pre-tax profit to £307 million, with weaker-than-expected guidance for the year ahead.
Revenue for the year ended January 31, declined 0.8% to £12.78 billion, as sluggish consumer demand and a challenging market environment weighed on performance.
Operating profit fell 29.8% to £407 million, while adjusted pre-tax profit—a key industry measure—declined 7% to £528 million.
Retail profit dropped 7.1% to £696 million, as cost-cutting efforts were unable to offset softer sales in the UK and Poland, though France performed slightly better than expected.
Gross margins improved by 50 basis points to 37.3%, supported by inventory management and supplier negotiations.
The company’s profit forecast for FY26 came in below market expectations, contributing to the stock decline.
Kingfisher guided for adjusted pre-tax profit between £480 million and £540 million, with the midpoint 6% lower than analyst estimates, according to RBC Capital Markets.
The retailer also noted that a £33 million one-off business rates benefit from B&Q in FY25 will not recur, though it expects a £10 million boost from the sale of its Romania business.
E-commerce and trade sales saw strong momentum, with total online sales rising 8.3% year-on-year to £2.5 billion, representing 19% of total group sales.
TradePoint, the company’s trade-focused business, grew 6.4% to £887 million, now making up 23.4% of B&Q’s sales.
However, discretionary “big-ticket” items, which account for 15% of total revenue, declined 4.4%, reflecting weaker consumer spending.
Despite the earnings drop, Kingfisher announced a new £300 million share buyback programme and maintained its total dividend at 12.4p per share.
Free cash flow was steady at £511 million, though guidance for FY26 has been revised down to £420 million-£480 million, slightly below prior estimates.
RBC noted that while Kingfisher has built a stronger digital and trade business in the UK, it will take time to achieve profitability in newer markets.
The company remains focused on its long-term strategy of expanding Screwfix, growing its e-commerce marketplace, and restructuring Castorama in France.
However, with the home improvement market facing continued pressure and discretionary spending slowing, the near-term outlook remains uncertain.