Kingfisher warns profits may drop 15%

B&Q owner Kingfisher highlighted the struggle facing UK retailers today as it warned first quarter profits were likely to be 15% lower than in 2004.

B&Q owner Kingfisher highlighted the struggle facing UK retailers today as it warned first quarter profits were likely to be 15% lower than in 2004.

The group, which is Europe’s biggest home improvement retailer, blamed the drop on poor weather and weak consumer confidence in its core UK market.

Kingfisher shares slumped 7% as a result, dragging the FTSE 100 Index sharply lower as investors fretted over the extent of the slowdown in consumer confidence. The FTSE 100 Index was down by as much as 60 points – not far from its low point for the year – after other high street names, including Marks & Spencer, Dixons and Argos owner GUS, fell by more than 3%.

Kingfisher, which also owns Castorama in France, did not provide a regional breakdown on its figures but said overall like-for-like sales were likely to be 6% lower than a year earlier in the three months to April 30.

The company, which has 337 B&Q outlets in the UK and 600 stores overall, reported first quarter retail profits of £145m (€213.3m) last year, but told the City it expected a decline of about 15% this time.

Analysts responded by slashing their profits forecasts for this year, with Investec’s Mark Charnock reducing his estimates by £70m (€103m) to £670m (€985.6m).

Hilary Cook of Barclays Stockbrokers added: “Around half of all DIY sales are within two years of moving house, so with the number of property transactions slowing it is unsurprising that Kingfisher has not been able to buck the trend.

“The consumer is under some pressure and B&Q was always going to be affected by the downturn. This is not a reason to panic though, as Kingfisher remains a very good company.”

Today’s update mirrors downbeat comments from elsewhere on the retail sector, as well as official survey data issued last week.

The Office for National Statistics showed retail sales volumes fell by 0.1% in March, with falls in demand for furniture, electrical and DIY goods.

Kingfisher chief executive Gerry Murphy said it was clear that any sales growth in the UK would be “hard won in very competitive markets”.

The group added in a statement: “The trading environment continues to be very tough for UK retailers, with consumer spending increasingly impacted by higher taxes, debt costs and inflation.

“Poor spring weather and an early Easter presented additional challenges for Kingfisher’s UK and French consumer businesses.”

The gloomy update came as Kingfisher said it was looking to China for further growth, following the acquisition of a business with 13 stores.

B&Q opened its first site in China in 1999 but is already the market leader there with 22 outlets and annual sales of £212m (€311.9m). It did not disclose how much it was paying for the China division of German retailer OBI.

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