Cost-of-living crisis weighs on B&Q owner Kingfisher and e-card retailer Moonpig
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown:
- Moonpig shares drop by more than 11%
- Kingfisher shares fall by 5%
- Cost-of-living concerns loom large in updates
- Worries about energy bills leads to jump in insulation sales at B&Q
‘’The cost-of-living storm is whipping around retailers with B&Q owner Kingfisher and e-card platform Moonpig being battered in the headwinds. The number of amateur builders, painters and carpenters hanging up their tool kits is growing as homeowners scramble around for savings, intently focused on finding ways to cut their energy bills. Although the purchase of outdoor bigger ticket items have remained resilient, it’s a far cry from the boom last year when people spent lockdown savings doing up their homes and gardens. Kingfisher’s numbers paint a picture of the waning DIY craze, with sales dropping by 4.1% to £6.8bn from the £7.1bn reported the same time last year. Instead of ‘nice to have’ makeovers, customers are piling trolleys high with insulation to help them cut soaring energy bills and prepare for a tough winter ahead. Sales of insulation products have jumped by 82% as homeowners fret about the jump in fuel costs, which even with the price freeze are still set to march much higher than last year.
Profits have taken a big tumble at Kingfisher, with half year numbers coming in 29.5% lower. Margins are being painfully squeezed due to the mounting costs of energy and core products, in addition to ongoing disruption at ports. The supply chain headaches haven’t eased and the company is finding it much harder to cope, with volatility continuing. Commodity prices may have dropped off recently but it takes time to feed through and the time lag is hurting. Kingfisher is now running out of out of nails to keep its full-year target intact. It has warned that although this half year drop off in sales was forecast, their outlook is much more uncertain for the coming months.
Moonpig’s shares have come down to earth with a bump as investors fret about the potential squeeze on sales, even though the company says it’s still on track for its full-year target. The company expects between 58% and 60% of revenue to arise in the second half the financial year, but there is a worry that this could be wishful thinking. Many more shoppers are expected to tighten their purse strings over the coming months and search for bargains as household bills mount. Scouting for cheaper cards and gifts are likely to be a priority for many people, rather than splashing the cash on personalised items. The decision to prioritise cards over other product ranges also seems to have knocked investor confidence, given that add-on purchases and expanded product ranges were considered to be big drivers for growth. But it seems Moonpig is battening down the hatches and focusing on its more resilient lines, to try and cope with the clouded outlook ahead.’’