B&Q-to-Screwfix brand owner Kingfisher (KGF) falls 5.2% to 395.8p as its much-anticipated first quarter trading statement disappoints. Whilst confirming improving trends in the UK and other key markets, the performance received a material weather boost while margin pressures persist.


Europe's biggest home improvement retailer flags a good start to the year with group like-for-like sales 6.1% ahead and retail profits up 20.3% to £142 million over the 13 weeks to 3 May. Guided by CEO Sir Ian Cheshire (pictured below), Kingfisher's performance received a boost from better weather right across Europe, enabling the £9.9 billion cap to generate sales and profit growth across its three biggest markets, the UK, France and Poland.




Yet given rising consumer confidence and a housing markets tailwind, the market appears distinctly unimpressed with the numbers. In the UK & Ireland, where the company trades as B&Q and Screwfix, retail profits grew 35.4% to £68 million, although this was below the £70 million-to-£75 million consensus amid ongoing downwards pressure on margins.


Like-for-like sales grew an encouraging 9.7% at DIY chain B&Q, buoyed by strong outdoor seasonal and building products sales. However this performance owed much to a late Easter and much better weather and was below best expectations in the context of the previous year's soft comparative metrics.


Improved performances in the UK and Poland were also offset by weak consumer confidence in France, where Kingfisher trades under the Castorama and Brico Depot brands and is in exclusive talks to acquire the Mr Bricolage home improvement chain. Although French retail profits perked up 9.8% to £70 million, like-for-like sales growth was sluggish at just 1.6%.


Tony Shiret, retail analyst at Espirito Santo, has a 'sell' rating on Kingfisher and comments: 'While the group trading profit has come in at an impressive £142 million (2013/14: £114 million) these were in our opinion disappointing figures owing much to the known weakness of the comparatives and falling short in the UK where there was some expectation of an upside surprise. In particular, the 200 basis points decline in the UK gross margin (probably more at B&Q) points to the absence of strategic visibility in this area from the new management and the growing issue of discounter pricing at the bottom end.'


Today's update also includes the news Kingfisher will return roughly £100 million via a 4.2p special dividend in July. This forms part of its plan to return £200 million to shareholders in the current year, with £35 million already returned in the form of share buybacks.

Issue Date: 29 May 2014