Posted By Uma Rajagopal
Posted on November 25, 2024
By James Davey
LONDON (Reuters) -European home improvement retailer Kingfisher on Monday warned of a 45 million pound ($57 million) hit to 2025/26 profit from tax raising measures in government budgets in both the UK and France, sending its shares sharply lower.
The group, which owns B&Q and Screwfix in the UK and Castorama and Brico Depot in France, also lowered the top end of its guidance for annual profit in the current 2024/25 year as it reported a 1.1% fall in third quarter underlying sales, reflecting a weak market and consumer in both countries in October.
Shares in Kingfisher were down 12% in early trading.
The group said an increase in UK employers’ National Insurance Contributions would cost it about 31 million pounds, while in France proposed changes to social taxes and the postponement of the abolition of a sales-based tax would cost it about 14 million pounds.
“We are developing a range of additional mitigations, but at this stage expect to offset only part of this impact,” it said.
As regards a 6.7% increase in Britain’s minimum wage, also announced in the budget, Kingfisher said it expected to offset the impact through structural cost reductions and productivity gains.
Last week, dozens of UK retailers, including Tesco and Sainsbury’s, warned the budget will make both higher prices and job losses a certainty and dent investment.
Kingfisher said trading in August and September improved but was impacted in October by uncertainty related to the budgets.
It said all of its businesses reported sales in line or ahead of the market but noted sales of big-ticket, more discretionary, items continued to be weak, though it did see early signs of improvement.
Kingfisher now expects full year 2024/25 adjusted profit before tax in the range of 510 million pounds to 540 million pounds ($642-$680 million) versus previous guidance of 510 million to 550 million pounds and the 568 million pounds made in 2023/24.
The group said trading had improved in the fourth quarter, with like-for-like sales down 0.5% in the three weeks to Nov. 23.
($1 = 0.7944 pounds)
(Reporting by James Davey; editing by Sarah Young, Kirsten Donovan)
