Kingfisher clipped by shock B&Q sales slide

RETAIL group Kingfisher today revealed a surprise drop in underlying sales at its core B&Q do-it-yourself chain, with chief executive Gerry Murphy blaming the 'more challenging' market conditions.

As consumer demand weakened, like-for-like sales at B&Q dropped by 1.2% in the fourth quarter, although including new space, there was a 2.6% increase to £914.7m.

It is the first quarter in almost three years that B&Q has failed to produce positive, like-for-like sales figures. While a slowdown had been expected, most analysts had hoped for some growth.

Murphy, who has been criticised recently for neglecting Kingfisher's UK operations as the group pursues international expansion, said there had been strong performances in France, Italy and China, and the group as a whole saw underlying sales ahead by 0.6%.

For the 12 months to 29 January, B&Q sales are up 1.3% and the group as a whole is 3.9% ahead like for like. Total sales for the year rose 8.7% to 7.65bn.

Despite the setback at home, Murphy still expects Kingfisher to post pre-exceptional profits for the year in line with the current market consensus of £675m to £700m, helped by continued improvements in margins, costs and cashflow.

At B&Q, sales were weak in flooring, lighting and wall decorations while sales of bathrooms and kitchens grew only slightly. But there was strong growth in areas such as paint and radiators, where new ranges have been introduced, and in building materials, where prices have been cut.

Further improvements have been made to B&Q's own-brand paint, flooring and shower products, and the group has launched a major price-cutting campaign, with reductions on 5000 items.

Further cost-cutting moves were also pushed through but these failed to fully offset the combination of weaker sales and price cuts.

In France, Castorama suffered a 0.9% like-for-like decline over the final quarter, hit by the disruption of its store revamp programme. But the Brico Depot chain saw strong growth, with underlying sales ahead by 16%.

China saw like-for-like growth of almost 17% and Italy was ahead by almost 4%. However, Poland was down by more than 14%, hit by changes to the VAT regime there ahead of joining the European Union last May.

Ruling the roost in DIY

KINGFISHER has expanded rapidly overseas in recent years although its core UK business still produces as much as 90% of profits. B&Q is facing growing competition from rivals such as Homebase, owned by Argos group GUS, and from smaller rivals such as Topps Tiles in flooring.

With operations including Castorama and Brico Depot in France, and a 21% stake in the German DIY retailer Hornbach, Kingfisher is Europe's largest home improvement retailer and the third-largest in the world, with 600 stores in nine countries across Asia and Europe.

Its total non-UK sales last year surged by a third, from £593m to £787m.