DIY fall hits Kingfisher

Housing slump will drag down group's profits, says Patrick Hosking

KINGFISHER, the stores group, is expected to reveal deep wounds from the moribund DIY market when it reports interim figures on Wednesday. But it will still come in a little above the pounds 70m-pounds 72m pre-tax profit figure now forecast by analysts.

The depressed housing market has hit sales and margins at B&Q, Kingfisher's most important chain, which has been embarrassed by a stubborn build- up of stocks, both in the stores and in the central warehouses.

Meanwhile, Kingfisher's prolonged search for a new chairman is nearing a conclusion. According to one source, a candidate has been found but he is unlikely to be signed up in time for the interim statement.

Sir Nigel Mobbs has been acting chairman since the demotion of Sir Geoffrey Mulcahy in January, after the group shocked investors with a profits warning. That triggered a boardroom clear-out, from which only Sir Geoffrey among the executives survived.

B&Q, the DIY chain, has suffered badly in the six months to the end of July. Along with other DIY operators, it has seen demand evaporating since Easter and margins narrowed accordingly.

B&Q contributed operating profits of pounds 44.5m in the 1994 half-year. This time it will be lucky to put in pounds 30m, analysts say. The hot summer stimulated demand for products such as garden furniture and barbecue sets, but not enough to offset weak sales of home-improvement items.

Sales in the new giant B&Q warehouse stores have been reasonably buoyant, but not sufficient to offset weaker sales in the traditional Supercentre outlets. Kingfisher plans to continue opening the larger format stores - there are 18 now trading.

However, it is considering scaling back its refurbishment programme for the Supercentres.

Analysts at stockbrokers Henderson Crosthwaite have slashed their forecast for B&Q's full-year contribution for the second time. They now expect it to make pounds 63m, compared with pounds 83m last time.

Elsewhere in Kingfisher, Sir Geoffrey is expected to be able to produce numbers to placate his critics. Woolworth, which is usually lossmaking in the first half, is likely to have broken even. Toy sales have been strong and the introduction of scanning systems is finally in place.

Darty, the French electronics retailer, is thought to be ahead, as is Superdrug, the toiletries chain. Comet, the UK electricals multiple, is expected to post an pounds 8m-pounds 10m loss.

The slump in DIY products shows no sign of abating despite aggressive promotions by all the main operators. Do It All, jointly owned by Boots and W H Smith, is the most vulnerable. J Sainsbury, owner of Homebase, has its hands full absorbing Texas Homecare, which was recently bought from Ladbroke Group.