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UK retailer Kingfisher’s Q1 profit up 30%

UK retailer Kingfisher’s Q1 profit up 30%
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First Published: Thu, May 31 2007. 05 58 PM IST
Updated: Thu, May 31 2007. 05 58 PM IST
By Reuters
London: Kingfisher, Europe and Asia’s leading home improvement retailer, saw its sales exceed expectations in the first quarter after a warm spring boosted demand for gardening and outdoor products.
Retail profit at the UK-based chain, owner of the B&Q and Castorama brands, rose 29.5% to 88.6 million pounds ($174.9 million).
Group chief executive Gerry Murphy said the outlook for international markets was generally positive but he remained cautious on Britain with demand for bigger home improvement projects likely to be dented by this year’s interest rate hikes.
“Kingfisher delivered strong sales and profit growth in the first quarter as good weather across Europe drove early seasonal demand for gardening and outdoor products. The year has started well, although it is still early days,” he said in a statement.
Kingfisher shares traded up 1.6% at 256.9 pence in opening trade, outperforming a 0.6% rise in the DJ Stoxx index of European retailers. Its biggest rival is Home Depot Inc , the world’s largest home improvements chain.
Kingfisher had shed more than 7% of value in the past month on expectations to interest rate rises this year in Britain, where it makes 60% of its profits, and ambitious renovation plans could crimp its growth in the second half.
Four analysts polled by Reuters saw like-for-like sales rising some 6% with retail profit of 88.5 million pounds.
Analysts had expected trading results to be encouraging with unusually warm spring weather helping sales. Kingfisher also benefited from soft comparatives after it suffered a fire in its kitchen distribution centre last year.
However, they remained cautious because visibility is still poor on the company’s two main markets Britain and France. “We suspect that with the recent Bank Holidays being rather wet B&Q’s Q2 performance will not be as good,” Seymour Pierce analyst Richard Ratner wrote in a note.
Murphy in a conference call with reporters also advised caution as its nearly six million shoppers would only buy big ticket items like garden furniture once a year.
“If they buy at Easter, they don’t buy again in May,” he said. He added interest rate hikes “didn’t help”.
Kingfisher showed particularly strong growth in Europe, excluding Britain and France, with like-for-like sales up 21.7% helped by booming property markets and a heatwave in Poland.
Market demand in Russia, where it opened its first Castorama store last year, was also “very strong”, Murphy said. “After decades of communism there is a lot of fixing to be done in Russia. For us, Russia looks like a pretty good opportunity,” he said.
In Asia, Kingfisher fared less well in the quarter with like-for-like sales falling 3.7% as the Chinese New Year celebrations typically kept shoppers away from stores.
Murphy said B&Q, China’s biggest home improvement retailer, as usual would ramp up promotions in the second half to lure them back. Kingfisher will open its first Hong Kong store on 1June and is on the track to continue opening 8-10 stores in China a year.
In total, Kingfisher will have 10% more stores by the end of this year than at the start, Murphy said.
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First Published: Thu, May 31 2007. 05 58 PM IST