2nd UPDATE: Kingfisher Shares Fall As 2Q Sales Decline

22nd Jul 2010 09:23

(Rewrites. Adds CEO, analyst comment, detail.) By Simon Zekaria Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Shares in Kingfisher PLC (KGF.LN) fell Thursday as Europe's biggest home improvement retailer said it remains cautious on the outlook for consumer spending after reporting a fall in second-quarter same-store sales. Chief Executive Ian Cheshire said that consumer sentiment in the U.K. remains under pressure and the group faces an "uncertain environment" across Europe. Retailers of large-ticket items are under pressure from macroeconomic headwinds as tax hikes and public spending cuts hit consumer sentiment and discretionary spending. German home improvement rival Praktiker Bau- und Heimwerkermaerkte Holding AG (PRA.XE) was also affected by the slower than expected improvement in the European economy as it posted falling second-quarter sales Thursday. Nonetheless, Kingfisher which owns the B&Q and Castorama chains said it remains on track to meet its first-half profit expectations as it focuses on cutting costs and driving higher-margin sales. "Our well established self-help initiatives leave us well-placed to continue our good progress over the balance of the year," Cheshire said. At 0754 GMT, Kingfisher shares were down 4 pence, or 1.9%, at 219 pence--the third-biggest faller on the FTSE 100 Index. Arden Partners analyst Nick Bubb said the group's U.K. business is under pressure, with sales disappointingly below expectations. U.K. and Ireland second-quarter same-store sales fell 4.4%. B&Q sales were down 4.3%, hit by a drop in demand for kitchen, bathroom and bedroom ranges. The group said sales were also hit by less promotional offers and by the rollout of Tradepoint, a service for the builders merchant industry, into large format stores. Still, fewer promotions, a reduction in inventory loss and direct sourcing from cheaper manufacturing bases boosted gross margins on a quarterly and yearly basis. Same-store sales in France rose 2.6% and sales from the Castorama brand rose 3.1%, supported by store modernizations and favorable weather, the group said. Same-store sales in other international markets rose 0.8%, although sales in Poland fell 4.2% in a weaker market, the company said. B&Q China same-stores sales rose 8.2%, but fell 17.1% overall on a lower store count. The group said it is on track to cut its losses in China "significantly" in the second quarter as its turnaround program continues. Stripping out currency fluctuations, group sales from stores open at least a year fell 0.8% in the 10 weeks to July 10 from a year earlier. That compares with a 1.8% fall in the first quarter. Overall, group sales increased 0.3%, compared with a 0.2% decline in the first quarter. Kingfisher only gave sales figures in its trading statement. It will report full interim results on Sept. 16. Kingfisher is Europe's biggest home improvement retailer by sales and the third-largest in the world after U.S.-based groups Home Depot Inc. (HD) and Lowe's Companies Inc. (LOW). It has more than 830 stores in eight countries in Europe and Asia, under its major brands B&Q, Castorama, Brico Depot and Screwfix. The company also has a 50% joint venture business in Turkey with the Koc Group and a 21% interest in, and strategic alliance with, German home improvement retailer Hornbach. By Simon Zekaria, Dow Jones Newswires; +44 207 842-9410; [email protected] (END) Dow Jones Newswires July 22, 2010 04:23 ET (08:23 GMT)