Morning Note: Market News and an update from DIY retailer Kingfisher.

Market News

US equities finished higher last night – S&P 500 (2.1%); Nasdaq (2.5%) – ending not far from their best levels in a session that saw major indices recouping much of last week's broad declines. The gains were driven by big tech and tariff-exposed stocks. Nvidia earnings today will help determine whether the momentum can continue.

Treasuries were firmer, with yields at the back of the curve down 8-10 basis points. 10-year yields moved back below 4.50% and 30-year yields slid back below 5%. Japan’s 40-year bond sale had the lowest bid-to-cover ratio since July, results that MLIV said may weigh on the global bond bounce. The dollar index was up 0.4%, while gold slipped back to $3,310 an ounce.

The minutes of the last Federal Reserve meeting from the 6–7 May may show rising concern over inflation and unemployment risks and reflect policymakers’ wait-and-see approach. The US president said he’s working on taking Fannie Mae and Freddie Mac public while maintaining government guarantees and oversight.

In Asia this morning, equities erased their earlier gains: Nikkei 225 (flat); Hang Seng (-0.5%). The FTSE 100 is currently 0.3% higher at 8,796, while Sterling trades at $1.3495 and €1.1915. Brent Crude is $64 a barrel.

Source: Bloomberg

Company News

Kingfisher has released a trading update for the three months to 30 April 2025. The company has made a good start to the year and reiterated its full-year guidance. In response, the shares are little changed in early trading.

Kingfisher is a pan-European DIY chain with more than 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 more work 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.

The recent government budgets in the UK and France have raised costs for retailers and impacted consumer sentiment in the near term. However, during the latest quarter, reported sales rose by 2.2% at constant currency to £3,314m. Excluding calendar timing issues – no leap year this year and the timing of bank holidays – growth was 3.1%.

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 were up 1.8% (and by 2.7% excluding calendar timing issues). Volume and transaction growth was driven by seasonal categories, which had a positive mix impact on average selling price. Retail price inflation was flat.

Core sales were resilient in the UK, but softer in France and Poland. Big-ticket sales were driven by underlying growth at B&Q, against soft prior-year comparatives. The group’s order book at the end of the quarter was positive versus the prior year. Seasonal categories generated strong double-digit growth across all UK banners, largely due to favourable weather conditions. Some of this growth is likely to have been pulled forward from the current quarter.

Kingfisher enjoyed continued market share gains in the UK & Ireland, France, and Poland. The company continued to increase its trade sales penetration, which accounted for 17% of sales versus 13% last year. Total e-commerce sales rose by 9.3% and now account for 20% of sales, vs. a 30% ambition.

Kingfisher UK & Ireland, LFL sales rose by 5.9%. By banner, B&Q was +7.9% and Screwfix was +2.9%. This compares to market growth in the low single-digits.

Outside of the UK, France delivered sequential improvement, outperforming challenging market conditions. However, LFL sales were still down 3.2%, with Castorama -3.0% and Brico Dépôt -3.3%. The store restructuring and modernisation plan at Castorama is on track.

The Other International division saw LFL sales rise by 5.3%, driven by 8.9% growth in Iberia. As expected, Poland (-3.2%) experienced short-term volatility due to geopolitical factors. On 2 May, the group completed the divestment of its 100% equity interest in Brico Dépôt Romania.

Regarding tariffs, the company highlights that it does not have any US sales or operations. It sources most of its products in Europe from the same country in which those products are then sold. The company also sources 20%-25% of its products from Asia. The group therefore expects little direct impact from any potential changes in cross-border tariffs but remains watchful of any broader impact on both inflation and market demand.

The statement highlights that consumer sentiment remains mixed across the group’s markets. However, the company has confirmed its guidance for the full year to 31 January 2026: adjusted PBT of £480m-£540m and free cash flow of £420m-£480m.

Source: Bloomberg