* Q1 operating profit up 20 pct to 142 mln stg
* UK sales weaker than hoped
* France weighed down by weak market
(Writes through, adds details)
By Neil Maidment
LONDON, May 29 Shares in Kingfisher,
Europe's biggest home improvements retailer, fell 6 percent on
Thursday as pressure on profit margins and a smaller than
expected sales boost from warmer weather pushed first-quarter
earnings below forecasts.
The owner of B&Q in Britain and Castorama and Brico Depot in
France said underlying operating profit for the 13 weeks to May
3 grew 20 percent to 142 million pounds ($237 million). Results
a year ago were depressed by bad weather across much of Europe.
The gain was slightly less than a market consensus forecast
of 145 million pounds. Analysts were unimpressed by a 2
percentage point fall in Kingfisher's UK gross profit margin,
which it blamed on higher sales of less profitable outdoor
products, rising home delivery costs and promotions.
Concerns over the UK margin, lower than expected group sales
growth of 6.1 percent and the impact of weak consumer confidence
in France combined to send Kingfisher shares down 6 percent to
392.5 pence by 0922 GMT.
"The group like-for-like sales increase was 'only 6
percent', rather than the hoped for 7 to 8 percent, with B&Q in
the UK just under 10 percent like-for-like, which ought to have
been better, given very weak comparatives and the better
weather/late Easter impact," retail analyst Nick Bubb said.
While not as high as hoped, underlying sales grew 10.1
percent in the UK and Ireland. Sales at trade-focused Screwfix
were strong and were up 9.7 percent at B&Q, its best performance
in a decade, as sales of barbecues shot up 42 percent and
consumers spent on improving their gardens.
"The 200 basis points of gross margin decline is likely in
our view to have been focused in B&Q where the company continues
to be indecisive between low prices and promotional pricing,"
analysts at Espirito Santo said, confirming their 'sell' rating.
Kingfisher's profits outpaced sales growth because its low
variable costs meant more of the additional sales fed through to
its bottom line.
The group's Chief Executive Ian Cheshire called the
first-quarter performance a strong start to the year but warned
that sales growth in its second quarter would be much tougher as
it comes up against strong year-earlier figures.
He said the UK gross margin movement was purely down to the
seasonal mix of its products and "nothing to get worried about".
In France, where Kingfisher makes half of its profits,
like-for-like sales growth came in below expectations at 1.6
percent, with better weather only easing the impact of soft
underlying markets caused by continued weak consumer confidence.
The company said exclusive talks to acquire smaller French
rival Mr Bricolage, announced in April, were
The group, which has 1,134 stores in nine countries, said
underlying sales rose 6.8 percent in its international division,
driven by Poland and Russia. But performance in China was weaker
than expected due to a fall in new property transactions.
The results overshadowed Kingfisher's announcement that it
would pay a 100 million-pound special dividend as part of its
plans to give shareholders extra rewards, starting with 200
million pounds this fiscal year.
Kingfisher said it would pay a special dividend of 4.2 pence
per share on July 25. The company, which in March outlined plans
for a multi-year programme of cash returns, has already returned
35 million pounds via a share buyback.
($1 = 0.5986 British Pounds)
(Additional reporting by Kate Holton; editing by Tom Pfeiffer)