B&Q reports smaller drop in sales than expected

KINGFISHER Plc, Europe’s largest home-improvement retailer, reported a smaller drop in sales at its B&Q shops than analysts had anticipated and said it expects revenue to improve in the year’s final quarter.

Third-quarter sales at Irish and British stores open at least a year fell 4.2% from the same period a year earlier, when discounts to clear inventory boosted sales, the London-based company said yesterday.

That was ahead of a company-compiled consensus estimate of a 7% decline.

Chief executive Ian Cheshire said early signs are “encouraging” for sales of festive products like £44.98-pound (€52.66) pop-up Christmas trees and tinsel. Kingfisher, which also owns France’s Castorama chain, is assessing its next phase of growth including expansion into India and Brazil and enhanced online and mobile offerings to drive future earnings.

“The fourth quarter has started well and expectations are for B&Q” comparable sales to rebound to 4% growth, said John Guy, an analyst at Royal Bank of Scotland Group Plc. He has a “buy” recommendation. Guy had anticipated a like-for-like sales decline of 5.1% in Britain and Ireland.

Finance director Kevin O’Byrne expects consensus estimates for annual pretax profit will “nudge up” by £10 million to £660m, he said on a call to journalists yesterday.

The shares have climbed 3.8% this year, compared with the 29% decline of Home Retail Group Plc, the owner of B&Q’s main British rival, Homebase.

So-called total retail profit, which excludes one-time costs, interest and taxes, rose 8.2% to £240 million. Earnings at the international division, which includes Poland, China, Spain, Russia, a joint venture in Turkey and a stake in Germany’s Hornbach, increased 18%. The unprofitable Chinese unit is expected to at least break-even next year.

B&Q, Britain’s largest home-improvement chain, is dependent on the housing market, where a recovery is faltering as the government plans for the biggest spending squeeze since World War II. British mortgage approvals fell to an eight-month low in October, a sign that the market slowdown is intensifying.

The British home-improvement market will likely continue to decline between 2% and 3% next year, Cheshire said. He expects B&Q can outpace the market through the addition of its Tradepoint counters which target professional builders, enhanced products ranges and services.