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Beast from the East and weak UK consumer demand hurts Kingfisher sales

Kingfisher's B&Q stores in the UK and Castorama stores in France were the worst performers in the first quarter

B&Q
Like-for-like sales at B&Q in the UK fell 9% in the first quarter

Kingfisher plc (LON:KGF) said it had a challenging start to the year as poor weather and a difficult UK retail market hurt first quarter sales.

The owner of Screwfix and B&Q reported total sales of £2.83bn for the three months to April 30, a 1.2% decline on a reported basis or 2.5% fall at constant currency.

Like-for-like sales at constant currency dropped 4.0%, driven by a 5.4% decrease in the UK and Ireland arm and a 3.9% fall in France.

In the UK, a 9.0% slump in like-for-like sales at B&Q offset 3.6% growth at Screwfix while France’s weak performance reflected continued struggles at its DIY retail store Castorama where like-for-like sales dropped 8.0%.

READ: Kingfisher profits fall as weak sales in France continue to drag on performance

In early morning trading, shares fell 1.1% to 292p. 

Beast from the East hits sales

"It was a challenging start to the year with exceptionally harsh weather across Europe and weak UK consumer demand,” said chief executive Veronique Laury.

“This impacted footfall, especially sales of weather related categories.”

Heavy snowfall, strong winds and icy temperatures from Siberia was brought over to many parts of the UK and Continental Europe in February and March, in what the media had dubbed the ‘Beast from the East’.  

The Beast from the East kept many consumers away while preventing many people from being able to get into work.

"All the stuff that’s weighed on sales in recent quarters continues to be a problem and may be getting worse," said Neil Wilson, chief market analyst at Markets.com.

The property market continues to exhibit signs of cooling, and this is likely to continue to pressure sales.

Still on track to meet strategic targets

Despite the impact from adverse weather and the squeeze on UK consumers from higher inflation and stagnant wage growth, Kingfisher said it was on track to achieve strategic targets in the third year of its transformation plan.

“Around 40% of our ranges are now unified and continue to be well received by customers,” said Laury.

“Sales of these ranges, excluding outdoor products, are up, and we expect to grow the full year group gross margin, after clearance costs.”

Laury, however, warned that market conditions “continue to be mixed” with economic uncertainty in the UK and volatility in France while Poland remains “supportive”.

Separately, Kingfisher announced it would start the next £50mln of its share buyback programme today.  The company returned £40mln in the year to date through a share buyback and has now completed £500mln of its £600mln capital return commitment. 

"In terms of shareholder returns, the buyback programme should provide some support, whilst the dividend yield of 3.7% is adequate given the current interest rate environment," said Richard Hunter, head of markets at Interactive Investor.

He added: Meanwhile, the strategic plan is still on track, with a simplified structure likely to lead to cost savings across the group. Gross margins should improve over the course of the year and Kingfisher’s increasing reliance on Digital, now accounting for around half of sales, positions it well in the evolving technology environment."

-- Adds analysts comments, share price --

Quick facts: Kingfisher plc

Price: 216.9 GBX

LSE:KGF
Market: LSE
Market Cap: £4.58 billion
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