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B&Q hit by slowdown in Spring DIY sales

Poor sales of kitchens, bathrooms and bedrooms led to a worse-than-expected performance at B&Q, the DIY chain, over the early part of the summer.

Parent company Kingfisher said that like-for-like sales at its core UK and Ireland B&Q stores fell by 4.3pc over the ten weeks to July 10. It said that sales of building products were also down, reflecting fewer money-off promotions and depressed consumer appetite for costly big-ticket purchases. However, the company said that the gross margin at B&Q was up "strongly" and that its gross profit was ahead of plan.

Kingfisher had a better performance elsewhere. Like-for-like sales at its stores in France rose by 2.6pc over the ten-week period, while sales at its other international stores - which include a chain in China - rose by 0.8pc. Overall, group sales fell by 0.8pc on a like-for-like basis.

Ian Cheshire, the retailer's chief executive, said that Kingfisher had put in a steady performance. "This is a solid performance in an uncertain environment for our customers right across Europe. Consumer spending remains under pressure, notably in the UK, and so we continued to focus on carefully targeting our promotions to drive profitable sales, improving our cash margins and vigorously controlling our costs. As a result our expectations for first-half cash and profit out turn remain on track," he said. He added that he remains "cautious" about the outlook for consumer spending.

However he said: "We are confident that the strengths of the group and our well established self-help initiatives leave us well-placed to continue our good progress over the balance of the year."

Nick Bubb, an analyst at Arden Partners, issued a note entitled "France good, UK bad". "The big debate is on the UK picture: the market expected small negative like-for-like [sales] in the second quarter for B&Q, but we had hoped to see a small positive, on the view that the weather has been helpful and the World Cup impact overstated. The UK is in fact disappointing, with B&Q like-for-like sales down by 4.3pc, albeit gross margins are good," said Mr Bubb.

Credit Suisse, the bank, said that overall sales were in line with expectations except at B&Q. However it noted that B&Q's sales had been affected by reduced "patterns of promotions" which may have hit sales of larger ticket items.

Investec Securities said that the trading figures were a "curate's egg". "Kingfisher's update was a mixed bag, with generally weaker like-for-like sales than forecast, with the notable exception of France," the broker said. The shares rose 1.8 to 225.3p.

Source : James Hall, Retail Editor - Telegraph

22 July 2010
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