Kingfisher is looking to the football World Cup to offset consumers’ gloom about higher taxes as it overcame bad weather to post higher first-quarter profits. Europe’s biggest home improvements retailer, which runs B&Q in the UK, said it had almost sold out of a garden gnome dressed in the England team kit ahead of the tournament kick-off next week and was also selling wheelbarrows and gazebos decked with the England flag. "I'm also sure that some of the effects of the World Cup will prompt people to buy the odd barbecue late on," said Chief Executive Ian Cheshire today.

Kingfisher said retail profit rose 15% to £146m in the 13 weeks ended 1 May, broadly in line with analysts' expectations. Group like-for-like sales fell 1.8% in the fiscal first quarter as severe winter weather hit sales of building products at the beginning of the period and a late spring also held back demand for garden plants. That was more than offset by higher profit margins, however, as the group continued to benefit from its business improvement plans, which include buying more products centrally and directly from cheaper manufacturing centres like Asia.

Kingfisher said it expected trading conditions to remain tough, with governments across Europe looking to cut debt. Much of the problem for consumers and businesses alike was uncertainty, Cheshire said, adding he hoped this would lift in Britain following an emergency budget on 22 June. "I think customers can deal with it (austerity measures), once they know what's in front of them, as can businesses," he said.

In the UK, sales at B&Q in the quarter were down 2.1% to £1.05bn (-2.8% LFL). The group said that bigger ticket project sales (showroom) were broadly flat despite the challenging conditions. Kitchen and appliance sales performed well, up 6% benefitting from improved merchandising, new ranges and targeted promotions. However, sales of decorative products were down around 1% and sales of seasonal and building products fell 5% impacted by the adverse weather and strong comparatives. Retail profit grew 12.0% to £67m with gross margin up 90 basis points despite more promotional activity. The group said that gross margins benefitted from better sales of higher margin products, continued shrinkage reduction and more direct sourcing.

Kingfisher said it was stepping up its investment in building products at B&Q, where it is also rolling out specialist Trade Point counters in larger stores. It announced a £25m makeover for its joinery, power tools, hand tools, electrical and plumbing aisles, and said it would launch over 4,000 new building-related products.

In France, Kingfisher’s Castorama and Brico Dépôt chains saw total sales grow 2.2% to £1.1bn (+0.2% LFL). Retail profit grew 17.0% to £60m benefitting from gross margins up around 100 basis points, with fewer promotions year on year, higher direct sourcing and continued buying optimisation benefits.

Other International total sales decreased by 0.7% to £411m (-3.8% LFL). Ten net fewer stores (excluding Turkey JV) were trading compared to Q1 last year as a result of the store rationalisation programme in China. Retail profit was down 9.5% to £14m, reflecting lower profits in Poland partially offset by lower losses in China.

NamNews - Thursday 3rd June 2010

 

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