Kingfisher soars as B&Q defies housing market gloom

By Mark Potter

LONDON (Reuters) - Home improvements retailer Kingfisher (KGF.L) defied a weak UK housing market by posting a small rise in same-stores sales and improving profit margins at its B&Q chain, raising hopes its recovery plan would bear fruit.

Shares in Europe's biggest do-it-yourself chain leapt as much as 15.6 percent early on Thursday.

Kingfisher, whose stock almost halved in value between May 2007 and the beginning of this month, said like-for-like sales at B&Q rose 0.2 percent in the second quarter of its financial year, recovering from an 8.1 percent drop in the first quarter.

Both figures were distorted by weather, with the first-quarter figures dented by a wet Spring and second-quarter numbers compared against a wash-out summer last year.

"Nevertheless, the move back into positive territory is good news for sentiment," said Panmure analyst Philip Dorgan.

Retailers across Europe are struggling as shoppers cut back on spending amid rising food, fuel and mortgage costs, and home improvements chains have taken an extra hit from a plunge in housing market deals in key economies such as the UK.

Retail sales fell a record 3.9 percent in June from May, official data showed on Thursday, a day after figures showing a record drop in mortgage approvals.

Kingfisher, which runs over 800 stores in nine countries across Europe and Asia, described trading conditions in the UK as "extremely tough" and said it remained cautious about the prospects for consumer spending.