DIY blues clip Kingfisher's wings

THE INVESTMENT COLUMN

Kingfisher looks worryingly rickety as it splutters along the high street - just as one wheel is bolted back on, another vital part falls off.

At the beginning of the year a profits warning and boardroom clear-out showed the need for urgent repairs at Woolworths and Comet. Just as those businesses are back on the road, B&Q's hub caps have spun off.

To be fair, Kingfisher is not the only one suffering from the DIY blues. Recent figures from Do It All, the Boots and WH Smith venture, were just as bad. There is no escaping the continuing sluggishness of the housing market.

But B&Q has succeeded in making a difficult situation worse. Under an ambitious "twin-track opening strategy", it is opening more of its mega- sized Warehouse formats while persisting with its standard- sized B&Q outlets. Although the 16 branches of Warehouse are doing well, increasing like-for-like sales by 11 per cent, the others are struggling. It appears that one format is cannibalising the other.

Elsewhere, the picture is less gloomy, though hardly yet an invitation to buy the shares. Woolworths is improving under the tutelage of Roger Jones and operating losses of pounds 6.9m last year were reduced to pounds 0.9m in the six months to July, traditionally the weaker period for the group.

Higher sales are being achieved through the elimination of operational errors such as the poor stock control that dogged the chain last year.

The belated introduction of electronic point-of-sale systems is improving efficiency and there has been an improvement in like-for-like sales of 7 per cent, although much depends on Christmas.

Comet seems almost as bad as it was. It has reversed a sales decline, but increased half-year losses to pounds 8.7m because of investment in the stores.

Market share is still declining and poorly-located sites remain a problem.

Kingfisher can thank its lucky stars it bought Darty, the French electrical retailer, that is proving mercifully resilient. It achieved a 12 per cent increase in profits and now accounts for more than half of group profits. Without it, retail profits of pounds 33.5m from sales of pounds 1.75bn would be a pathetic return.

The shares have recovered some of the ground lost since last year's spectacular decline and put on a further 19p to 483p yesterday. A break-up of the group would push them higher, but with Sir Geoff Mulcahy at the helm, this is not on the agenda.

NatWest Securities is forecasting profits of pounds 275m for the year, which puts the shares on a forward price-earnings ratio of 16. Expensive.