Morning Note: Market news and a positive update from DIY retailer Kingfisher.

Market News

The hawkish wing of the FOMC chimed in with Raphael Bostic, Beth Hammack, and Alberto Musalem warning that further rate cuts aren’t a given, while Stephen Miran’s push for a lower neutral rate (and faster easing) was mostly ignored by traders. The 10-year Treasury yield ticked up to 4.15%. Despite this, gold climbed to a new high above $3,750 an ounce, supported by heavy ETF demand and central-bank buying.

Jamie Dimon told the Times of India that he will be engaging with stakeholders and policymakers over H-1B visas, and he hopes the US and India can reach a trade deal. Marco Rubio said US-India ties remain “of critical importance” after he met Indian External Affairs Minister Subrahmanyam Jaishankar yesterday.

US equities rose to record highs last night – S&P 500 (+0.4%); Nasdaq (+0.7%) – driven by Nvidia’s pledge to invest up to $100bn in OpenAI to build data centers reignited AI euphoria. Apple was also firm on early signs of strong demand for the iPhone 17. In Asia this morning, Japan was closed for holiday, while Hong Kong (-1.2%) and China (-1.1%) shares fell as the region braced for its potentially most damaging typhoon since 2018.

The FTSE 100 is currently 0.3% higher at 9,250, while Sterling trades at $1.3510 and €1.1460. Rachel Reeves has been urged to take 2p off the rate of employee national insurance and add it to income tax in her autumn budget, to raise billions of pounds while protecting workers’ pay packets.

ASM International fell after cutting its second-half outlook, while Heineken rose after the Dutch brewer said it would buy Costa Rica’s Florida Ice and Farm Company beverage and retail businesses, boosting its presence in Central America.

Source: Bloomberg

Company News

Kingfisher has this morning released results for the financial half-year to 31 July 2025, which were slightly better than expected. The company raised its full-year profit & free cash flow guidance and has accelerated its share buyback programme. In response, the shares have bounced by 17% in early trading.

Kingfisher is a pan-European DIY chain with around 2,000 stores across brands such as B&Q, TradePoint, Screwfix, and Castorama. The European home improvement market is £235bn across a customer base of 320m homes. Growth is expected to be driven by population growth, urbanisation, and the need to repair an ageing housing stock. This is being helped in part by working from home and the focus on energy efficiency.

The company’s sales are made up of Core categories (64% of the total) which include the sales from non-seasonal products across all categories, other than 'big-ticket' sales. Big-ticket sales (15%) include the sales of kitchen, bathroom & storage products. Seasonal category sales (21%) include the sales from certain products within the group’s outdoor, electricals, plumbing, heating & cooling (EPHC), and surfaces & décor categories.

The group’s medium-term financial priorities are focused on growth, cash generation, and higher returns to shareholders. Retail space is expected to grow by 1.5%-2.5% each year. The group is targeting sales growth ahead of its markets, adjusted PBT growth faster than sales growth, and free cash flow of more than £500m p.a. from FY26/27. The group intends to maintain an efficient capital structure, with surplus capital to be returned via share buybacks or special dividends.

In the near term, the company highlights that mixed consumer sentiment and political uncertainty remains, as does ongoing cost pressure.

During the half-year to 31 July, reported sales grew by 0.9% at constant currency to £6.8bn. On a like-for-like (LFL) basis (which includes stores that have been open for more than a year and excludes the impact of currency and portfolio changes) sales rose by 1.9% on an underlying basis driven by volume and transaction growth. Total e-commerce sales rose by 11.1% and now account for 20% of sales, vs. a 30% ambition.

The company saw improved quarter-on-quarter growth trends in core categories and a third consecutive quarter of big-ticket underlying growth, with strong weather-related seasonal performance led by the UK.

Kingfisher UK & Ireland LFL sales rose by 3.9%, with B&Q and Screwfix up 4.4% and 3.0%, respectively. Growth was driven by trade and e-commerce initiatives, product innovation, and transference from the closure of Homebase stores.

Outside of the UK, the company saw sequential improvement in sales from Q1 to Q2 in a subdued but improving market backdrop. Kingfisher France LFL sales fell by 2.1%, with Castorama -1.4% and Brico Dépôt -2.9%. Poland fell by 2.2%, while the Other International division saw LFL sales grow 8.1%.

The company enjoyed market share gains in the UK, France, and Spain, while Poland was broadly in line with the market.

The group entered the year with significant cost headwinds (c.£145m) consisting of wage inflation, higher UK employer national insurance contributions, increased social taxes in France and the new packaging fees in the UK. Against this backdrop, the remained disciplined on managing costs and cash.

The group’s gross margin rose by 100 basis points to 37.7%, reflecting the leveraging Kingfisher’s buying and sourcing scale, by margin accretive initiatives including growth from e-commerce marketplaces and retail media. The adjusted retail profit margin increased by 40 basis points to 6.6%, driven by gross margin and operating cost initiatives. Adjusted pre-tax profit, which excludes the impact of transformation P&L costs and exceptional items, rose by 10.2% to £368m.

The group generated free cash flow of £478m, up 13.5%, reflecting earnings growth and inventory management. As a result, net debt fell by 12% to £1,726m, with gearing falling to 1.3x net debt to EBITDA, well below the medium-term target ceiling of 2.0x. The interim dividend was held at 3.8p. The company is part-way through a £300m share buyback programme, with £93m completed by 31 July. The pace of the programme is being accelerated and is now expected to complete by March 2026.

Looking forward to the full financial year to 31 January 2026, the group now expects adjusted PBT to be at the ‘upper end’ of its £480m-£540m range, while free cash flow is now expected to reach £480m-£520m (vs. £420m-£480m previously).

Source: Bloomberg