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LONDON (Reuters) - Kingfisher (KGF.L), Europe's biggest home improvements retailer, said uncertainty over the French government's budget plans had knocked consumer confidence in its largest market, as it posted a 6 percent drop in quarterly profit.
The group, which runs market leader B&Q in Britain and trades as Castorama and Brico Depot in France and elsewhere, said on Thursday it was also difficult to see when trading conditions might improve in the UK, making planning difficult.
"The hardest thing at the moment is trying to call the outlook for 2013 which is just frankly opaque," Chief Executive Ian Cheshire told reporters.
Store groups in Europe, particularly those focused on "big ticket" items like kitchens and bathrooms, are finding the going tough as consumers' disposable incomes are squeezed by inflation, muted wages growth and austerity measures, and as they fret over the implications of the euro zone debt crisis.
A continuing low level of housing transactions is also bad news for home improvement firms like Kingfisher.
Cheshire said the backdrop in France was "very uncertain", blaming a lack of clarity on the final budget proposals of new Socialist president Francois Hollande.
"It's a temporary period of uncertainty rather than a major dislocation in the economy but it could be a six month uncertainty while people try and work out what their tax position's going to be," he said.
Shares in Kingfisher, the world's No. 3 home improvements retailer behind U.S. groups Lowe's (LOW.N) and Home Depot (HD.N), were down 1.5 percent at 276 pence at 1150 GMT, valuing the business at 6.6 billion pounds.
"With around half of profits coming from France, it is likely that the downgrade cycle is not yet over," said Panmure Gordon analyst Philip Dorgan, referring to possible further cuts in analysts' profit forecasts.
In Britain, Cheshire said Christmas trade across the sector would "bump along OK but probably come in a bit of a late rush."
He said he would welcome measures to cut unemployment and assist the housing market in British finance minister George Osborne's December 5 autumn statement.
Kingfisher has tried to offset weak demand with a drive to improve profitability by buying more goods centrally, and directly, from cheaper manufacturing centres such as China.
The group, which trades from over 1,000 stores in eight countries in Europe and Asia, made a retail profit of 257 million pounds in the 13 weeks to October 27, ahead of analysts' average forecast of 255 million, but below 273 million in 2011.
Third-quarter profit was hit by 16 million pounds on the translation of euro and Polish zloty overseas profits into sterling. On a constant currency basis retail profit was flat, helped by better margins and cost savings.
Sales fell 3.9 percent to 2.71 billion pounds, with sales at stores open over a year down 2.8 percent at constant currencies.
Like-for-like sales fell 2.8 percent in France and were down 3.8 percent in Britain and Ireland. They fell 0.8 percent in the 'other international' division, which includes Poland, Russia and China.
In September Kingfisher posted a 15.5 percent fall in first-half profit that reflected a hit to sales from dreadful summer weather in Britain and France.
Cheshire said it was "slightly concerning to see people (in the UK) forecasting the worst winter in a hundred years after the worst spring and summer in a hundred years."
Though Kingfisher ended the period with net cash of 222 million pounds, Cheshire said a possible capital return would not be considered until a longstanding French tax case relating to 130 million pounds was settled.
editing by Rosalba O'Brien and Mark Potter