- Kingfisher said the employers’ NI hike will cost around £31m in profits next year
- The group has also trimmed its earnings outlook for the current financial year
Kingfisher shares plummeted on Monday after the retailer cautioned of a potential £45million hit to profits if recently unveiled Budget announcements go ahead.
The Screwfix owner believes the upcoming hike in employers’ National Insurance contributions will cost around £31million in profits for the 2025/26 fiscal year.
It forecasts a further £14million impact should proposed changes in France to social taxes and the delay in abolishing the sales-based CVAE be ratified.
Kingfisher has also trimmed its earnings outlook for the current financial year as it suggested the UK and French governments’ plans had weakened consumer sentiment last month.
The London-based company now anticipates its adjusted pre-tax profits will total around £510million to £540million, having previously expected them to be as high as £550million.
Following this announcement, its shares plunged 13.4 per cent to 255.3p by the early afternoon, making them the FTSE 100 Index’s biggest faller by some distance.
Kingfisher’s sales have flatlined over the past two years as higher interest rates have weighed on demand.
This followed a Covid-induced boom in trade caused by a stamp duty holiday, the rise of working from home, and a growing desire among Britons for larger properties.
In the three months ending 31 October, Kingfisher’s turnover shrank by 0.6 per cent to £3.2billion, partly because of lower revenues in France.
Sales at Brico Dépôt fell by 3.3 per cent to £464million, while they declined by 4.9 per cent to £503million at Castorama amid subdued demand for ‘big-ticket’ items.
Trading has remained weak since the start of November, but Kingfisher noted its like-for-like sales were only 0.5 per cent down year-on-year.
Thierry Garnier, chief executive of Kingfisher, remarked: ‘Looking towards next year, recent political and macroeconomic developments have layered incremental uncertainty onto the near-term outlook in our markets.
‘And so we continue to focus our energy on what we can control – delivering further market share gains through our key strategic priorities, and managing our retail prices, costs and cash effectively.’
Many prominent British retailers have warned that scheduled changes to NI rates, together with the higher National Living Wage, will not just impact profits but also lead to price increases and job cuts.
According to analysis by Morgan Stanley, supermarkets Sainsbury’s, Morrisons, and Asda face a combined £1.3billion in extra NI bills over the course of this parliament, while Tesco could pay an additional £1billion.
Russ Mould, investment director at AJ Bell, said Kingfisher ‘faces significant headwinds from various tax changes, and there is only so much these can be offset by finding new cost efficiencies.
‘Companies have spent the past few years focusing on operating improvements, and it’s hard to keep finding new ways to save money without cutting back too far and damaging service levels.’
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