B&Q owner Kingfisher comes up short despite "strong" Q1 - UPDATE

29th May 2014 12:09

Kingfisher Chief Executive Sir Ian Cheshire hailed a "strong start to the year" for the DIY retailer, but first-quarter results failed to impress the market on Thursday with profits coming in shy of analysts' forecasts.Europe's biggest home improvement retailer, which owns the B&Q and Screwfix chains, saw shares fall by 5% to 396.6p after reporting retail profits of £142m in the three months ended May 3rd, up 20.3% on the year before but below the consensus estimate of £145m.Constant currency sales during the quarter were 9.2% higher at £2.78bn, though reported growth was limited to just 6.1% as foreign exchange movements and weak consumer confidence pulled sales in France slightly lower.Growth was also flattered by relatively easy comparatives given that figures from the year before were hampered by cold and wet weather across the UK and Europe. A later-than-usual Easter this year also helped results, the company said.Cheshire admitted that while the first quarter was "encouraging", the period "is one of our smallest and the growth achieved largely reflects comparisons with the very difficult start to last year"."We will annualise stronger figures in our second quarter and so, as ever, we will look at the whole of the first half results to properly assess our underlying performance," he said.B&Q revenues rose by 10.5% to £1.01bn in the first quarter, with sales of outdoor seasonal and building products up nearly a third over the year. Meanwhile, Screwfix sales jumped 24.2% to £192m.Gross margins down despite easy weather comparativesAnalysts were left unimpressed after gross margins in the UK and Ireland division fell 200 basis points, reflecting higher sales of the lower-margin outdoor seasonal and building products, as well as higher promotionally-led showroom sales and increased home delivery costs.Kingfisher also announced a special dividend of 4.2p per share, equalling £100m, as part of the previously-announced £200m in total capital to be returned to shareholders this year.Commenting on the results, Will Hedden, Premium Client Manager at IG, said: "Headline numbers might have looked peaky, but missed the all-important analyst estimates, and showed a familiar macro theme of tightening margins in the UK and a reluctant consumer in France. "A special dividend will have helped the long term holders, but another summer like last year would not go a miss," he said.BC