Kingfisher cuts targets as depressed housing market sinks DIY sales

Click to follow
The Independent Online

Kingfisher, the retail giant that owns B&Q, warned yesterday that the DIY sector has been hit by the slowdown in the property market and the wider economy, revealing that its sales plunged in the past few months.

The largest DIY chain in the UK said sales were 8.1 per cent down over February, March and April compared with the same months last year – even lower than analysts had feared.

The company said the early Easter and worse-than-expected weather in spring – "we didn't predict snow," said chief executive Ian Cheshire – had not helped its struggle against slowing consumer spending in the UK.

The group, which employs 73,000, has reduced its full-year sales targets – without revealing by how much – but said it would maintain profits targets.

Mr Cheshire, overseeing his first quarter in charge after being appointed in February, said: "Most of the industry is expecting a year of market decline. We are going to plan on that basis." He added that no stores in the UK would be closed and there would be "no major activity" in cutting jobs.

Collins Stewart analyst Rob Mann added that market conditions were likely to have deteriorated more sharply in May and warned there was little prospect of a "near term reversal in these trading trends".

Mr Cheshire said the group had taken "vigorous action to improve margins and control costs" against the tough market backdrop in the past year. He also pointed to stronger performance in "indoor" items as well as some of its markets abroad.

About 60 per cent of profits are now generated outside the UK, according to Mr Cheshire, with Poland and Russia performing well. However, Kingfisher's overseas expansion has not all been successful. In China, for example, the company has been forced to close five loss-making stores and scale back three others.

Kingfisher is particularly vulnerable to a consumer slowdown because the group is in the middle of a turnaround programme in the UK, with plans that have included revamping six stores in the past year.

One analyst said the company had improved its performance but now faces a difficult time. He said: "The UK turnaround forms the bulk of management's bullish recovery plans which may make for hard work against a deteriorating housing and consumer backdrop. Nevertheless, progress so far has been encouraging."