Kingfisher PLC III – Leverage. The art of doing more with less?
- DDL Ltd
- Jul 3
- 3 min read
Updated: 13 hours ago
Kingfisher PLC, the owner of B&Q and Screwfix, operates in multiple European countries, including the UK, France and Poland. Their stock is the third most shorted in the FTSE 100 with 6.8% of its equity share capital sold short by short sellers.
This is the third in a small series of blogs analysing Kingfisher PLC’s Earnings Call Q&A session for their full year results on 25th March 2025.
Below is another excellent question asked by Deutsche Bank Research Analyst, Adam Cochrane.
"...Secondly, within the £145m of costs and then mitigation, what degree of operational leverage or deleverage have you assumed within that £145m? Or is that the difference between the other bit of the guidance range? What's in the £145m?"
Thierry Garnier, CEO, Kingfisher PLC, replied as follows:
"I think maybe to start on the £145m and we can comment together. The £145m is a combination of cost and gross margin. You remember back in November, we said we would partially mitigate. Since then, we have looked at all our cost plans. In fact, we have probably more in the pipeline. We have accelerated some of those cost actions. And part of it is mitigated through gross margin. Gross margin is retail media, marketplace, logistics, the square-meter reductions I have mentioned. We have accelerated that since November. Other relatively good news is we have better negotiations with our Far East suppliers than expected six months ago. We have been able to negotiate down raw materials; raw material prices during COVID were very high. So since then, they are down. We've been able to negotiate down some of these COGS, and that contributed to this £145m."
Bhavesh Mistry, CFO, Kingfisher PLC added:
"Well, I'll just add to what Thierry said. One of the things I've observed going around the business, seeing the stores, is a really strong muscle in managing costs. Coming from Tesco, a much lower-margin business, I know what good looks like, what good rigor on managing cost looks like. I have definitely seen that across all the banners. And I gave you some examples in my script of some of the initiatives that we're doing, the intelligent cost savings to get to structural reductions over time."
This a rather technical question, with many moving parts, relating to an increase in costs of £145m. The Research Analyst is trying to get clarity over the inputs and outputs that make up that figure.
From our perspective, the first thing we note is that the CEO calls for help from the CFO. The CEO then gives a rather vague answer stating that raw material prices are lower than what they were during COVID, which is unsurprising.
The CFO, who is new in the role, is now compelled to say something but doesn’t commit to definitive answers. His reply consequently not only ignores the question but is vague bordering on inane. We would ask, what does, ‘a really strong muscle in managing costs,’ mean?
We note that he feels compelled to refer to his previous employer as a way of shoring up his credentials.
By commenting together, neither the CEO nor the CFO provides the clarity required.
The question remains. We know that in answer to, ‘What’s in the £145m?’ it is, ‘a combination of cost and gross margin’ and that the ‘degree of operational leverage or deleverage assumed within the £145m’ is only ‘partially mitigated through gross margin’.
All blog subjects are identified, validated and written by the DDL Team. See www.ddlltd.com for more on Deception Detection Lab Ltd. Neither DDL nor its employees have any position in Kingfisher PLC.
