B&Q owner Kingfisher profits expected to tumble

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B&Q Kingfisher

Kingfisher is expected to post an uptick in sales when it reports its half-year results this week, but profits are expected to tumble as wetter-than-usual summer weather and a slowing property market takes its toll.

The parent company of B&Q and Screwfix recorded weak results in its first quarter, and a second quarter trading update issued last month warned that its five-year turnaround strategy had caused “business disruption”, and came alongside lacklustre figures.

Nonetheless, investors  are still hoping the transformation, which includes cost-cutting and efficiency savings, merging product ranges and IT systems and closing underperforming stores, would begin to bear fruit.

Total sales at B&Q fell 7.7 per cent to £967 million as a slowing housing market in the UK following the Brexit vote means a potential slowdown for DIY retailers.

Meanwhile like-for-like sales at B&Q dropped 4.7 per cent in the period, with Kingfisher also pinning the fall on tough comparatives from last year and a strong first quarter in 2017, when better weather meant shoppers bought seasonal products early.

Analysts at broker Jefferies forecast that pre-tax profit for the first six months of the year will fall 18 per cent to £351 million, with major part of that decline deriving from transformation costs.

Meanwhile, IG chief market analyst Chris Beauchamp expects Kingfisher to a revenue increase of 4.5 per cent to £6 billion in the first half, while earnings could drop 20 per cent.

Beauchamp said Kingfisher’s Screwfix division was its “saving grace”, regularly clocking up double-digit sales increases. In the first quarter, like-for-like sales were up 11 per cent.

Hargreaves Lansdown equity analyst  George Salmon said: “Kingfisher were at pains to point out its second quarter was impacted by seasonal swings, but the declines were sufficient to ensure like-for-like sales at B&Q joined the French divisions Castorama and Brico Depot in negative territory.

“This underwhelming Q2 update followed an unspectacular first quarter, meaning aggregate half year numbers are unlikely to bring much joy for investors this time.”

Kingfisher chief executive is aiming to boost profits by £500 million a year by 2021 as aprt of her turnaround efforts.

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