May 24, 2017 / 6:29 AM / 9 months ago

Weak sales, supply disruption take toll on Kingfisher

(Reuters) - Britain’s Kingfisher (KGF.L) warned of supply disruption related to its five-year transformation plan as the home improvements retailer posted lower underlying quarterly sales because of weakness in France.

Shares in the company fell as much as 7 percent, placing it on course for its biggest percentage drop since December and making it the biggest loser on the FTSE bluechip index .FTSE.

In the three months to the end of April, Kingfisher reported a 0.6 percent fall in sales in stores open for more than a year. Analysts at UBS had estimated sales would increase by 1 percent, while analysts at Davy Research expected a rise of 0.3 percent.

Kingfisher, which trades as B&Q and Screwfix in Britain and Castorama and Brico Depot in France and other markets, said like-for-like sales were down 5.5 percent in France, but rose 3.5 percent in Britain and Ireland.

In March, Kingfisher had warned that the effect of Britain’s vote to leave the European Union and potential disruption from the French election could hit trade in its two main markets.

Reports from other London-listed retailers painted a mixed picture on Wednesday.

Marks & Spencer (MKS.L), one of the best known names in British retail, warned the trading environment remained tough as it posted a 10 percent decline in annual profit.

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Dixons Carphone (DC.L), however, sounded a more optimistic note, confirming it expected annual profit to rise by around nine percent and said it had not seen any changes in UK consumer behaviour.


    Last year, Kingfisher set out a strategy to boost annual profit by 500 million pounds from 2021 that will cost 800 million pounds over five years to deliver.

    The plan involves unifying product ranges across the business, improving e-commerce capabilities and driving efficiencies.

    The company said it was experiencing some business disruption given the scale of change related to its “One Kingfisher” transformation plan, as it cleared old ranges, marketed new ranges and rolled out a unified IT platform.

    “This...could get worse as the year progresses. It is hard to run a business and implement this degree of change without impacting the customer experience,” said Investec analyst Kate Calvert, who has a “sell” rating on the stock.

    A Kingfisher spokesman told Reuters “the situation is improving,” but that some disruption was expected to continue as there are still a lot of unified product ranges to come in.

    “While the group remains on track to deliver full-year targets, it is also clear that these risks (from One plan) will persist throughout what will be a busy year for the group,” said Davy analyst Michael Mitchell, who has a “neutral” rating on the stock.

    Reporting by Arathy S Nair, James Davey and Tenzin Pema; Editing by Mark Potter/Keith Weir

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