Retailer Kingfisher hurt by sales dip at its British B&Q business

By James Davey
A B&Q store is seen in London, Britain March 31, 2015. REUTERS/Stefan Wermuth/File Photo

By James Davey

LONDON (Reuters) - Kingfisher , Europe's largest home improvement retailer, reported worse than expected quarterly sales at its British B&Q business due to a drop in demand for garden furniture and other summer products, denting the group's share price.

The group also saw sales fall at its Castorama and Brico Depot businesses in France and faced further disruption from its restructuring plan.

Kingfisher was cautious about the second-half economic outlook for Britain and France, but said it was comfortable with average analysts' forecasts for underlying earnings per share of 26 pence for full-year 2017/18, versus 25.9 pence in 2016/17.

The stock, already down 12 percent this year, fell as much as 6 percent on Thursday and was the biggest faller in the blue chip FTSE 100 index.

"While valuation is not demanding, (the) short-term risk of further downgrades remains high given the scale (and) complexity of transformation," said Investec analyst Kate Calvert, who has a "sell" rating on the stock.

Kingfisher is in the second year of a plan to boost annual profit by 500 million pounds ($645 million) from 2021. The plan, costing 800 million pounds over five years to deliver, includes unifying product ranges and improving e-commerce capabilities.

It said overall like-for-like sales fell 1.9 percent in its second quarter to July 31, a deterioration from a fall of 0.6 percent in the previous quarter..

Like-for-like sales in Britain and Ireland fell 1.0 percent and were down 3.8 percent in France.

B&Q was the main disappointment. Its like-for-like sales fell 4.7 percent versus expectations for a 3 percent fall.

The drop reflected a 10.7 percent dip in sales of seasonal goods after a first quarter rise of 17 percent that was boosted by better weather. The second quarter last year was also strong, making comparatives tough.

Like-for-like sales at Kingfisher's Screwfix outlet rose 10.8 percent.

"B&Q's performance was impacted by seasonal swings across Q1 and Q2. We have also continued to experience some disruption across the businesses, although on an improving trend," said Chief Executive Véronique Laury.

"Having been very aware that this year would be challenging given the step up in transformation activity, we already have self-help plans in place to support our overall Year 2 performance," she said in reference to cost savings.

British retail sales slowed in July, as shoppers reduced purchases of most things other than food, adding to worries about falling consumer demand, official data showed on Thursday.

Kingfisher's main British rival Homebase, owned by Wesfarmers unit Bunnings, reported a 54 million pounds loss for the year to June 30 on Thursday and a 4.3 percent fall in fourth quarter same store sales. It said the poor performance would continue in the short term as Bunnings restructured the business.

(Editing by Kate Holton and Edmund Blair)