November 28, 2013 6:03 pm

France woes hurt Kingfisher

Shares in Kingfisher fell more than 4 per cent after the DIY retailer warned of difficult conditions in France.

French sales rose 1.9 per cent to £1.17bn, in the three months to November 2, although sales from stores open at least a year were flat. Retail profit fell 5.6 per cent to £140m, hit by an increase in promotions as the French market weakened.

“There is uncertainty in France. It is not getting better in the way that we think the UK is getting better,” said Ian Cheshire, chief executive. “We can’t see the forward indicators being positive [in France] that we can in the UK.”

The shares closed down 4.4 per cent at 378.6p on Thursday.

However, Mr Cheshire said that longer term, the problems in France could create opportunities for Kingfisher to pick up distressed rivals, in the way that it bought 27 stores from Focus DIY in the UK.

The French business was also hit by the absence of a £4m benefit, which it enjoyed last year from the release of a bonus provision and £2m of costs in preparation for store openings.

In the UK and Ireland, total sales rose 3.7 per cent to £1.1bn, helped by a strong performance by Screwfix, and encouraging early signs in the smaller tradesman market, offset by slower retail sales at B&Q.

B&Q’s sales rose 0.8 per cent to £915m, while sales from stores open at least a year rose 0.4 per cent.

Sales at Screwfix rose 21.1 per cent to £180m, or 11.1 per cent on a like-for-like basis.

Mr Cheshire said that in the UK, demand from tradesmen was recovering more strongly than retail sales.

Life is getting worse, not better for Kingfisher in France and with no signs yet of a pick-up in B&Q’s trading, we are downgrading again

- Jonathan Pritchard, analyst, Oriel Securities

“The closer you are to the building trade, the stronger it is. I don’t think [the retail sectors] are yet seeing a consistent pick up,” he said.

However, there were some early indicators of improvement, such as stronger flooring sales.

Sales of outdoor seasonal products fell 8 per cent year on year, as Kingfisher sold more in the second quarter amid the hot weather.

Overall, group sales rose 4.6 per cent to £2.9bn, helped by the performance of Kingfisher’s other international markets.

Nevertheless, analysts at Oriel Securities cut their forecast of underlying profit in the year to January from £750m to £740m and from £845m to £820m in the year to January 2015.

“Life is getting worse, not better for Kingfisher in France and with no signs yet of a pick-up in B&Q’s trading, we are downgrading again,” said Jonathan Pritchard, analyst at Oriel Securities. “Gross margin improvements are being reinvested on both sides of the Channel and with forecasts heading backwards, a buyback is highly unlikely,” .

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