Kingfisher, Europe's biggest home improvement retailer, revealed a 53% fall in profits at its core chain B&Q that dragged down overall third-quarter results, and said the market continues to weaken.
B&Q's retail profit sank to £50.3m sterling from £106.7m this time last year. That dragged group retail profit down 21% to £157.1m in the 13 weeks to October 29, compared with analyst forecasts of £138-161m.
B&Q's like-for-like sales were down 8.4% and gross margins were 2 percentage points lower, reflecting aggressive price cutting as the company tries to boost flagging sales.
Kingfisher, which also owns number-one French chain Castorama, has been hit by weak demand, rising costs and now fierce price competition in the UK.
CEO Gerry Murphy was downbeat about the immediate outlook. 'Continued weakening consumer demand for housing-related products, together with widespread price promotion and rising costs, is seriously impacting UK retail performance,' he said.
Kingfisher added that if current market conditions persist, retail profit margins will fall further in the fourth quarter. Competitors are becoming increasingly desperate and prices are being slashed. Some analysts have already this year cut earnings forecasts for Kingfisher by around 45%. They are expecting a big fall in profits for this year to around £445m, down from £671m.
Meanwhile in France, Castorama produced an improved performance, with like-for-like sales up 3.7% and retail profit of £46.7m, up 14.2%. The market is showing signs of recovery after a difficult first half.
Kingfisher is investing heavily abroad while shrinking UK operations and extending into product areas like electricals.
