B&Q owner Kingfisher cuts profit forecast as Poland, France drag

By Sarah Young

LONDON (Reuters) -European home improvement retailer Kingfisher downgraded its annual profit forecast by 7% on Tuesday, after a drop in sales in Poland and France offset a pick-up in the UK and Ireland, sending its shares down 6%.

Kingfisher, which owns B&Q and Screwfix in Britain and Castorama and Brico Depot in France, said that while the forecast cut reflected tougher trading in Europe, performance in the UK and Ireland, its biggest market which accounts for almost half of sales, improved.

British consumers were “healthy”, chief executive Thierry Garnier said, helping first-half underlying sales rise 1.7%, with spending focused on “big-ticket” items like new kitchens, bathrooms and insulation.

“If you’re moving less, you spend more time to renovate and maintain,” Garnier told reporters, explaining the minimal impact on the group from Britain’s stagnating housing market.

In contrast, consumer sentiment in Poland and France was much weaker, he said. In Poland, underlying sales fell 10.9% in the six months to the end of July, French sales were 3.8% behind, although a focus on cost helped profitability.

The group now expects pre-tax profit of around 590 million pounds ($730 million) for the 12 months to the end of January.

Shares in FTSE 100 group Kingfisher slipped 6% to 220 pence.

“The market consensus of the shares as a sell reflects little confidence in the group’s immediate outlook,” said Richard Hunter, Head of Markets at interactive investor.

CEO Garnier said inflation had peaked and he was encouraged by the ability to negotiate lower prices from suppliers in Asia, but weather during the period had not helped sales.

“In short, we never had great weather, it was too cold or it was too hot,” he said.

Kingfisher said confidence in future demand for home improvement supplies gave it the confidence to announce a new 300 million pound share buyback programme starting in October.

($1 = 0.8080 pounds)

(Reporting by Sarah Young; Editing by Sachin Ravikumar and James Davey, Kirsten Donovan)