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REFILE-UPDATE 2-Kingfisher fears European political upheaval could hurt trade
March 22, 2017 / 7:57 AM / in 8 months

REFILE-UPDATE 2-Kingfisher fears European political upheaval could hurt trade

(Fixes typographical error in fifth paragraph)

* Cautious about impact of Brexit, French elections

* Says UK trade holding up, France underperforming

* 2016-17 profit up 8.3 pct, ahead of forecasts

* Says five-year plan on track

* Shares fall up to 6 pct

By James Davey

LONDON, March 22 (Reuters) - Home improvement retailer Kingfisher warned that the effect of the Brexit vote and potential disruption from the French election could hit trade in its two main markets, sending its shares sharply lower on Wednesday.

The firm said that while demand in Britain, where it trades as B&Q and Screwfix, was holding up, it continued to underperform in France, where it operates as Castorama and Brico Depot.

“Looking forward, the EU referendum has created uncertainty for the UK economic outlook and we remain cautious on the outlook for France, especially in light of the forthcoming presidential elections,” said CEO Véronique Laury in the company’s annual earnings statement.

France will elect a new president in a two-stage contest to be held in April and May.

Laury’s caution pushed Kingfisher shares almost 6 percent lower, the worst performer on the FTSE 100 index, even though the company beat forecasts for 2016-17 profit and said a five year plan to restructure the business was on track after its first year.

“We remain sellers on the basis of the challenges posed by the static nature of the UK and French markets, likely impacts of channel switch on market leaders as digital evolves and the sheer scale of the business risk here,” said Haitong analyst Tony Shiret.


Kingfisher’s finance chief Karen Witts said that despite fears of a UK consumer slowdown after last June’s Brexit vote, the firm had not yet seen any significant change in behaviour, pointing to lead indicators such as the number of tradesmen buying “big ticket” power tools and work wear at Screwfix.

“That’s all holding up very well,” she told reporters.

However, chief executive Laury said the firm had to do more to make its French businesses more competitive.

Last year she detailed a strategy to boost Kingfisher’s annual profit by 500 million pounds ($623 million) from 2021 that will cost 800 million pounds over five years to deliver.

The plan involves unifying product ranges across the business, improving e-commerce capabilities and driving efficiencies.

Laury was relaxed about the prospect of increased competition in the UK from rival Homebase, now owned by Wesfarmers’ Bunnings.

“It doesn’t change our plan at all...It’s stimulating to have a strong competitor in front of you,” she said.

Kingfisher also wants to return 600 million pounds to shareholders over three years through share buybacks. So far 200 million pounds has been returned.

The firm reported a 8.3 percent rise in adjusted pretax profit to 743 million pounds in the year to Jan. 31, partly helped by favourable currency movements.

Total adjusted sales were up 1.7 percent on a constant currency basis to 11.2 billion pounds, with the UK & Ireland up 2.4 percent but France down 1.4 percent.

Kingfisher also said on Wednesday that Chairman Daniel Bernard will step down in June after eight years in the role and be succeeded by Andy Cosslett, who joins as a non-executive director next month.

Cosslett is a former executive of Unilever, Cadbury Schweppes and InterContinental Hotels. ($1 = 0.8024 pounds) (Editing by Kate Holton/Keith Weir)

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