Profits jumped but like-for-like sales fell in the third quarter at B&Q owner Kingfisher. The performance drew mixed reaction from analysts.
“Despite the unhelpful consumer backdrop, our view is that Kingfisher remains a well run business that is successfully navigating its way through the downturn. It is worth noting that in the UK and Irish part of the business, profit was up by 5.5% thanks to careful margin management and cost control.
“Positively, cost management has not come at the expense of a longer-term vision for the business. The medium term plan to retain and extend its leadership position in DIY is underpinned by a number of initiatives from store refurbishment, a multichannel push and brand development. Over the next few years these things should start to pay dividends, especially when the market swings back into growth.
“Taking a long term view, while the recession has inevitably been painful for B&Q the company will actually emerge from it in a much more dominant position. The exit of Focus from the market and the signals from Homebase that it is to move further away from core DIY, now leave the field clear for B&Q.” – Neil Saunders, Conlumino
“We said yesterday that the best investor relations team in the industry would surely engineer a top-of-the-range third quarter outcome today at Kingfisher, so we have to take our hats off to them for presenting a bottom-of-the-range outcome of £257m as a very small increase on a constant currency basis. FX translation hits on profits in France and Poland actually reduced profits by £16m or 6%. There is a ton of detail, but some of the key metrics look a bit disappointing, with French like-for-like sales down by 2.8% and B&Q like-for-like down 4% and the outlook statement is fairly cautious.” – Nick Bubb, independent
“It is not difficult to be bearish on the profit outlook for Kingfisher and we are today downgrading our full year 2013 and full year 2014 forecasts by 2% and 4% to £731m and £759m respectively. To reflect likely increased promotional activity. Clearly, with 50% of profit earned in France, if the consumer economy was to take a further turn for the worse, then there are more downgrades to come. We view the worst case outlook as a 30% downgrade to profits in France, which translates into a 15% fall at the group level.” - Philip Dorgan, Panmure Gordon