Just a quick update on Kingfisher PLC, a holding in our Income Growth fund, which currently offers an attractive 4.4% yield. Kingfisher is an international home improvement company operating retail banners like B&Q, Castorama, and Screwfix, offering products and services to consumers and trade professionals across Europe. You can read more about Kingfisher in our note from April 2024.

Below are the takeaways from a recent meeting we had with management:

Kingfisher’s Strategic Vision and Growth Potential 

While Kingfisher has faced challenges over the past decade (due to factors like COVID-19 and past strategic missteps affecting EPS growth), management sees significant upside in its valuation, especially when compared to industry giants like Home Depot. Kingfisher holds strong market-leading positions with banners like B&Q and Screwfix in the UK and has robust operations in Poland and France.
The company is actively pursuing several initiatives to boost future growth and Total Shareholder Return:

• Space Expansion:  Targeting 1.5 – 2.5% growth through strategic store expansion.
• Trade Customer Focus:  A major push to grow the trade customer segment. Current penetration is 17%, with an ambitious goal of reaching levels closer to Home Depot’s 50%. This involves dedicated trade offerings, loyalty programs, and specialized sales support across all brands.
• E-commerce & Marketplace Expansion:  The online marketplace is rapidly expanding from 17,000 to 2 million SKUs, aiming for 30% penetration of the E-commerce market. This strategy is designed to seamlessly integrate online and in-store experiences, driving customer acquisition and store traffic.
• Shareholder Returns:  Commitment to a share buyback program and maintaining a strong dividend yield of 3.5 – 4%.

The company is currently implementing country specific programs to improve sales growth and earnings.

• France:  Efforts are underway to address challenges in this market through a marketplace relaunch, restructuring underperforming stores, transitioning to a franchise model, and introducing product ranges tailored to specific demographics.
• UK: Kingfisher strategically acquired 8 stores from Home Base following its receivership. This move is contributing to B&Q’s Q1 growth (approximately 7-8%) and is seen as an opportunity to further consolidate its position in the UK DIY market. Management is actively exploring additional acquisition opportunities.
• Poland:  Plans are in place to expand the successful Screwfix banner in Poland.

Kingfisher hired a new CFO in early 2025, placing a strong emphasis on improving Return on Capital Employed, rigorous cost management, and strategic investments, to ensure consistent EPS growth. Kingfisher is also proactively adapting its strategies to navigate broader macroeconomic challenges, including high interest rates and geopolitical instability, particularly in markets like Turkey.

Our Outlook: The insights from this meeting reinforce our positive view on Kingfisher’s strategic direction. Management is clearly focused on overcoming past challenges and leveraging its market leadership to drive sustainable growth and enhance shareholder value. We believe these initiatives well position Kingfisher to deliver a consistent dividend and improve its trading multiple. We see 25% upside in the stock.