LONDON (Reuters) - Kingfisher (KGF.L), owner of the B&Q and Castorama home improvement chains, posted a steep fall in profit, hurt by a weaker euro and April’s torrential rain which put British and French shoppers off buying spring favourites such as barbecues.
Shares in Europe’s biggest home improvements retailer rose as much as 3 percent, however, on hopes that with the sun now shining it can make up lost ground, particularly as Jubilee celebrations in Britain to mark Queen Elizabeth’s 60 years on the throne and the London Olympics improve the public mood.
“It’s a pretty challenging start to the year but it is a long way to go. This is our smallest quarter and we’ve got a good set up for the summer,” Kingfisher Chief Executive Ian Cheshire told reporters on Thursday.
“When the sun’s come out we’ve been happy with the reaction so if we can combine a bit of sunshine, a positive Jubilee and lots of golds at the Olympics, we might have a slightly different feel-good factor,” he said on a conference call.
Kingfisher, with about 950 stores in eight countries in Europe and Asia, said on Thursday its retail profit fell 8.6 percent to 160 million pounds ($248.5 million) in the three months to April 30.
Several analysts said, however, that the first quarter results were largely as expected and had done nothing to change their “buy” or “hold” recommendations on Kingfisher shares, which rose 1.
The stock had already fallen 12 percent since the start of April and has substantially outperformed both peers and the broader market since the onset of the credit crisis in 2007.
Kingfisher, the world’s No. 3 home improvements retailer behind U.S. groups Lowe’s (LOW.N) and Home Depot (HD.N), has performed better than many peers, offsetting weak demand with a drive to improve profitability by buying more goods centrally, and directly, from cheaper manufacturing centres like China.
Investec analyst David Jeary, who has a ‘hold’ rating on the stock, told clients he would not be changing his forecasts.
“There may be some trimming of forecasts within the market, some overdue on currency moves. It may be that the market starts to cool on Kingfisher, but we have started to feel warmer towards it,” Jeary wrote.
Richard Cathcart at Espirito Santo Investment Bank said his “buy” case was intact while Panmure Gordon’s Philip Dorgan said he remained a buyer of the stock, noting better weather in recent days.
“We expect that Q2 will see a pick up in momentum - look out of the window,” he wrote.
BUTTS & BUNTING
Britain & Ireland proved particularly weak. Sales at UK market leader B&Q dived as poor weather sapped appetite for building products and lopped 30 percent off sales of seasonal goods.
Sales of barbecues at B&Q plunged 57 percent and hosepipes dropped 45 percent as a UK ban on their use following an unusually dry winter saw people turn to water butts instead.
The firm, which also owns the Screwfix and Brico Depot brands and a stake in Germany’s Hornbach, also faced tough comparisons after buoyant trading last year when sales were boosted by fine spring weather and the marriage of Queen Elizabeth’s grandson Prince William.
The company said it had so far sold 100,000 metres of Union Jack bunting, more than 3,000 Royal Queen and Royal King garden gnomes and over 10,000 Diamond Jubilee cushions ahead of this weekend’s festivities across Britain.
The tough first quarter also reflected the impact of a weaker euro and Polish zloty, according to the company, which counts on France and the British Isles to each contribute over 40 percent of its annual turnover of more than 10 billion pounds.
Even excluding foreign exchange fluctuations, sales at stores open over a year fell 4.8 percent year-on-year, driven by a 10.4 percent drop in the UK & Ireland.
First quarter like-for-like sales rose 0.7 percent in France - weaker than in the previous quarter but better than the UK due to a lower reliance on seasonal product ranges. ($1 = 0.6438 British pounds)
Additional reporting by James Davey; Editing by Rosalba O'Brien and Helen Massy-Beresford