UPDATE 1-Kingfisher shows resilience as sales pick-up

Thu Jul 19, 2012 2:38am EDT

* 10 weeks to July 7 group sales up 3.7 pct, lfl down 0.4 pct

* B&Q UK & Ireland lfl sales up 1.6 pct vs f'cst up 0.4 pct

* B&Q margin lower as prices cut, more promotions

* Castorama France lfl sales down 0.2 pct vs f'cst up 1.7 pct

* Says unprecedented wet weather hit demand

LONDON, July 19 (Reuters) - Kingfisher, Europe's biggest home improvement retailer, said underlying sales recovered in its second quarter, showing its resilience in the economic downturn even though heavy rain put British and French shoppers off buying seasonal ranges.

The firm, which runs the market-leading B&Q chain in Britain as well as Castorama and Brico Depot in France and elsewhere, said on Thursday sales at stores open over a year fell 0.4 percent in the 10 weeks to July 7, the bulk of its fiscal second quarter.

That compares with a first quarter fall of 4.8 percent.

Like-for-like sales at B&Q UK and Ireland rose 1.6 percent.

That compares to analysts' consensus forecast of a rise of 0.4 percent, according to a company poll, and a first quarter slump of 11.7 percent blamed on the wettest April since records began.

However, the firm said B&Q's gross margin is expected to be down, reflecting price cuts to clear horticultural stocks and other promotions.

Underlying sales at Castorama France fell 0.2 percent after a fall of 0.8 percent in the previous quarter, while they fell 4.8 percent at Brico Depot, following a rise of 2.4 percent.

Analysts had forecast rises of 1.7 percent and 0.9 percent respectively.

Many European retailers are suffering as disposable incomes are squeezed by inflation, muted wages growth and government austerity measures, and as shoppers fret over the implications of the euro zone debt crisis.

Kingfisher, the world's No. 3 home improvements retailer behind U.S. groups Lowe's and Home Depot, has generally performed better than most, offsetting weak demand in many of its markets with a drive to improve profitability by buying more goods centrally, and directly, from cheaper manufacturing centres like China.

Shares in Kingfisher, down 11 percent over the last three months, closed Wednesday at 271 pence, valuing the business at 6.4 billion pounds ($10 billion).

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