Warmer weather boosts profits at Kingfisher

The warmer autumn weather boosted sales at Kingfisher, the home improvement retailer, which reported a 13 per cent increase in group operating profits during its third quarter, beating analysts expectations.

The owner of DIY chain B&Q said sales of garden furniture rose 68 per cent in the 13 weeks to October 29, while sales of lawnmowers at its French DIY business, Castorama, rose 17 per cent, compared with the same period a year ago.

The strong sales performance at the French business, which generates about 40 per cent of group annual operating profits in this period, led analysts to expect a 1 per cent upgrade to consensus estimates for full-year pre-tax profits, rising to £800m from £789m.

French operating profits rose 18.8 per cent in the period to £154m, with like-for-like sales up almost 2 per cent against the same quarter a year previously. In the UK, operating profits grew almost 22 per cent to £56m despite a 0.7 per cent decline in like-for-like sales. Trade was boosted by the addition of 27 former Focus DIY stores.

Ian Cheshire, group chief executive, said he was positive about the long-term outlook for the business, despite mounting economic uncertainty in the UK and the eurozone.

“In the middle of difficult times, there are also going to be opportunities,” he said. There could be “other opportunities like Focus” in other parts of Europe. With net cash of £14m, he added that Kingfisher was more likely to pick up tranches of stores from weaker competitors than target a corporate acquisition.

At a group level, Kingfisher reported a 3.5 per cent rise in sales to £2.81bn, boosting operating profit 13.1 per cent to £273m.

The Polish business was the main area of weakness, with operating profits falling 11 per cent to £40m in the period due to adverse currency movements against the dollar.

Kingfisher’s struggling Chinese business produced a £1m loss for the period – half the £2m loss reported in the same period last year – and Mr Cheshire said a 32 per cent drop-off in the Chinese housing market was to blame. Work continues on developing a “radically different” format for the Chinese consumer, with a greater emphasis on design and fitting services.

“As long as Kingfisher continues to drive solid gross margin gains going forward, this could mitigate any sales weakness from European austerity measures next year,” said John Guy, retail analyst at RBS.

Kingfisher shares rose 7.9p on Thursday to 263.5p, a rise of more than 3 per cent.