The City met the news that B&Q owner Kingfisher UK & Ireland’s retail profit slumped 9.8% to £75m in the first quarter with little surprise after poor weather hit sales
“Following this update, we suspect FY13 will come down close to our ‘low end of the range’ pre-tax profit level of £810m. Over the short term, it is clear the Q1 figures have come in below management expectations; the outlook in the company’s two core markets is uncertain and question marks remain on the company’s Chinese operation, while the company has set itself a rather lacklustre objective of improving operating profitability by only £300m over the next five years. However, we have confidence in the management.” – Freddie George, Seymour Pierce
“We expect that Q2 will see a pick up in momentum (look out of the window), with seasonal product catch up and softer comparables. We like the Creating The Leader initiative announced with the prelims and we think that it underpins long term forecasts. This includes moving common sourcing from 2% to 50% and direct sourcing from 15% to 35% and will create £300m of pre-tax profit over the next five years, which underpins consensus growth expectations by three quarters.” – Philip Dorgan, Panmure Gordon
“As expected, showroom sales reduced due to the new EDLP profile. Indoor sales were up though. Gross margins rose 120bps through mix, sourcing and promotional control. Screwfix sales increased 10.2% and profits rose by 31.7% to £11m, boosted by ‘click, pay n collect’ and new ranges.” Matthew McEachran,Singer Capital Markets
“We believe there will be some trimming to consensus numbers, with some overdue on the currency front. It would indeed be ironic were the ardour of the market towards Kingfisher starts to cool, just as we have started to feel more warmly disposed.” - David Jeary, Investec Securities
“At the heart of these terrible figures is the washout we experienced in April. Over the rest of the year, things should pick up. However, DIY & gardening is a sector which has declined for several years now and fundamentally it remains vulnerable to further shocks. The housing market is still weak, confidence for major projects is low and spending money remains under pressure.
“Kingfisher has a strong strategy in place, looking at ways to stimulate spend, widening its product ranges and keeping a tight control of costs; but it is operating in a very difficult market and it can expect lots more ups and downs ahead.” – Matt Piner, Conlumino