Shares in B&Q owner Kingfisher fell up to 5.8% yesterday, taking losses for the year to more than 30%, after it reported weak quarterly sales and said it would be pulling out of a number of European markets.
Like-for-like sales fell 1.3% in the three months to the end of October which is the home improvement group’s third quarter. The decline was driven by the poor performance of Castorama, Kingfisher’s French DIY retail division, where sales slumped over 7% instead of an expected 3% decline.
Kingfisher is in the third year of a five-year programme to raise annual profit by £500m (€560m), but profits are forecast to fall in its current financial year.
The group said it would pull out of Russia, Spain and Portugal. The three markets, account for a combined 7% of Kingfisher’s total sales. The Russian business is loss-making, while the group is close to break-even in Iberia.
Like-for-like sales in Kingfisher’s UK and Ireland business, which covers the B&Q and Screwfix brands, fell 0.7%, to just under £1.3bn. The group operates eight B&Q stores in Ireland; including three in Dublin and one in Cork.
However, the UK, France and Poland account for 90% of group sales. Poland was up 1.4%, in like-for-like sales terms, but France was down by 3.4%. Group chief executive Véronique Laury warned there is “no quick fix” for Castorama in France. Analysts were similarly gloomy in their outlook.
“We believe Kingfisher’s transformation plan will not yield the margin benefits it was supposed to, so there will be more calls for a break-up, but in between a margin reset may be necessary,” said RBC Europe analyst Richard Chamberlain.
Laury said the exit from Russia, Spain and Portugal “will allow us to apply our strategy with more focus and efficiency in our main markets where we have, or can reach, a market leading position”.
Kingfisher’s plan for the group, costing £800m over five years, involves unifying product ranges across brands, boosting e-commerce and seeking savings.
- Additional reporting Reuters