Kingfisher (LSE: KGF) reported a 7% fall in full-year revenue earlier than tax (PBT) on Tuesday (25 March), and the share price promptly slumped 12% when the market opened.

The house enchancment retailer noticed gross sales dip 1.5% within the 12 months to 31 January 2025, with bottom-line adjusted earnings per share (EPS) down 5.2%. However the proprietor of the UK’s B&Q and Screwfix, and Castorama and Brico Depot in France, reckoned its core classes have been resilient.

Large-ticket spend on issues like kitchens and loos has been beneath strain. CEO Thierry Garnier stated: “Recent government budgets in the UK and France have raised costs for retailers and impacted consumer sentiment in the near term.”

Market share

The boss advised us: “For the first time in over six years, we grew our market share in all key regions. We delivered profit and free cash flow in line with or ahead of our initial guidance, with strong delivery against our strategic objectives.”

Does that recommend we may very well be one of many stronger gamers in an total powerful market? I’ve all the time believed an financial squeeze can present probably the greatest instances to separate the long-term winners from the also-rans.

It’s simple to look good when individuals are spending large and margins are fats all spherical. However it may be quite a bit more durable to keep up effectivity and money circulate in a dip.

Kingfisher recorded free money circulate of £511m within the 12 months, down simply 0.5% from the earlier 12 months’s £514m. That’s ok for me. And the board held the overall dividend at 12.4p per share, for a 4.4% yield on yesterday’s shut.

The 12 months forward

When a sector is beneath strain, I look to liquidity. And that money circulate determine is a good begin. However the firm expects to see a dip within the 2025-26 12 months, to round £420m to £480m. It does, although, intention to get it again above £500m yearly from 2026-27.

The corporate additionally launched a brand new £300m share buyback, which reveals confidence beneath strain. I’m all the time in two minds over buybacks when there’s web debt on the books. And Kingfisher’s year-end web debt stood at £2bn. Nonetheless, it’s modest in comparison with £12.8bn in gross sales.

The board expects adjusted PBT between £480m to £540m this 12 months. So it appears we’re in for a tighter time. Is administration, with its new share buyback, attempting to maintain traders candy earlier than issues decide up once more? I’m getting that feeling.

The funding case

Analysts anticipate EPS to develop within the present 12 months and past. And with the mid-point of that instructed PBT vary being barely forward of the FY determine simply reported, they is likely to be proper. But it surely’s just one% up and the vary is extensive.

That revenue uncertainty may very well be the largest threat in the mean time, and it may throw forecasts off. Do projected price-to-earnings (P/E) multiples of round 12 to13 present sufficient security margin? If Kingfisher maintains its dividends, they may. We may see share price weak spot forward, however I fee it as one for traders trying previous at present’s financial system to think about.