UPDATE 1-Weak demand and wet weather hammers Kingfisher profits

Thu May 30, 2013 2:46am EDT

LONDON May 30 (Reuters) - Kingfisher, Europe's largest DIY retailer, posted a near-30 percent drop in first quarter profit as weak demand and poor weather continued to hit trade in its key markets.

The group, which runs B&Q and Screwfix in the UK and Castorama and Brico Depot in France, on Thursday said retail profit was 114 million pounds ($172 million) in the 13 weeks to May 4, down 29.2 percent on a year ago and well below a company compiled consensus forecast of 137 million pounds.

Revenue was 2.6 billion pounds, down 4.2 percent on a like for like basis, and deteriorating from a 3.4 percent fall in the final quarter of last year.

Like-for-like sales fell 5.6 percent in France and 4.7 percent in UK and Ireland, but rose 0.7 percent in its smaller 'other international' arm, led by growth in China and Russia.

Kingfisher is suffering along with other European retailers from cash-strapped customers holding off buying "big ticket" items like kitchens and bathrooms.

Continued poor weather across Europe added to its woes, particularly in March, accounting for much of its first-quarter profit fall. However the firm said more normal weather at the end of the period had heralded an improved performance.

Chief Executive Ian Cheshire said it would focus hard on margin and cost initiatives to help ease tough conditions, such as through buying more goods centrally from cheaper manufacturing centres like China.

Its operating margin was 4.3 percent, down from 6 percent a year earlier.

The group struggled in its two biggest markets. B&Q's like-for-like sales fell 5.6 percent in the first quarter, worse than analysts' consensus forecast of down between 2 and 3 percent.

In France like-for-like sales fell 4.1 percent at Castorama and 7.3 percent at Brico Depot, broadly in range with respective consensus forecasts of 4-5 percent and 5-7 percent declines.

Shares in the firm closed at 327.8 pence on Wednesday, valuing the firm at around 7.7 billion pounds.

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