Kingfisher: Q1 Trading Update

Kingfisher reports Q1 total sales down 3.6% and Q1 retail profit down 8.6% impacted by poor weather across Europe and adverse foreign currency translation.

A summary of the update can be found below. For the full release, including tables and other country specific data, please view our Industry Articles page: http://www.insightdiy.co.uk/articles.asp

Highlights in constant currencies:

-Sales and profit impacted by record adverse weather in the UK and across continental Europe, compounded by the comparison with a favourable Q1 this time last year
-Seasonal sales across the Group were down 22% impacting profit by around £29 million. However, on-going gross margin and cost initiatives helped limit the Q1 overall profit decline
-Net cash was £165 million (30 April 2011: net cash of £283 million)

Kingfisher UK & Ireland

Total sales declined by 6.9% to £1,105 million (-10.4% LFL) reflecting year on year unfavourable weather patterns and fewer public holidays. Retail profit declined by 9.8% to £75 million.

B&Q UK & Ireland's total sales declined by 8.9% to £968 million (-11.7% LFL). Sales of outdoor seasonal products, which can represent up to 30% of total Q1 sales, were down around 30%. Sales of building products were also impacted by adverse weather. Cash sales of showroom (kitchens, bathrooms and bedrooms) products were up slightly in Q1. However, the year started with a lower order balance following the introduction of Every Day Low Prices (EDLP) in Q4 last year resulting in recognised sales(1) in the quarter being down compared to last year. With this new EDLP trading strategy the sales profile is expected to be more even over the year. Sales of indoor decorative products were up as customers switched some of their home improvement activities indoors.

Retail profit declined by 13.8% to £65 million with margin and cost initiatives unable to fully offset the impact of the sharp year on year fall in seasonal sales. Gross margins were up 120 basis points reflecting better sales of higher margin products, fewer promotions and increased direct sourcing. A strong focus on operating cost efficiencies continued and in addition a one-off construction related claim for around £5 million was settled and received.

Screwfix grew total sales by 10.2% to £137 million in a challenging smaller tradesman market. Continuing initiatives which drove this performance included new ranges (e.g. radiators and work wear), the continued roll out of new outlets and the successful introduction of a mobile ‘click, pay & collect’ offer. Eight net new outlets were opened during Q1, taking the total to 223. Retail profit was up 31.7% to £11 million, reflecting the strong sales growth, more direct sourcing, distribution efficiencies and continued tight cost control.

Ian Cheshire, Group Chief Executive, said:

“We anticipated the first quarter would be challenging, compared with last year's strong growth which was boosted by favourable spring weather and public holidays. But an extremely wet April this year in the UK and France compounded the difficulty, adversely impacting sales of outdoor and seasonal categories.

“Given this unfavourable backdrop, we focused hard on our margin and cost initiatives and were able to significantly limit the profit impact. With the first quarter typically one of the least significant of the year and with the key summer season still ahead of us, we remain confident that we are well prepared to capitalise on any improvement in conditions and deliver a solid full year result.

“We are also making progress with our new programme of self-help initiatives, 'Creating the Leader', aimed at helping our customers have better, more sustainable homes and building a more valuable business for our shareholders”

For the full release, view our Industry Articles page: http://www.insightdiy.co.uk/articles.asp

Source : Kingfisher
www.kingfisher.com