March 21, 2018 / 7:39 AM / a year ago

UPDATE 3-Kingfisher warns of 'more uncertain' UK outlook as retailers struggle

* B&Q, Screwfix trading worsens in fourth quarter

* Carpetright plans to close stores

* Kingfisher shares fall as much as 8 pct (Adds detail, CEO, CFO, updates shares)

By James Davey

LONDON, March 21 (Reuters) - Kingfisher, Europe’s second largest home improvement retailer, warned on Wednesday the outlook for the UK market was “more uncertain” after a recent dip in trading, adding to concerns of a deterioration across the country’s retail sector.

Kingfisher shares fell as much as 8.5 percent after it said its B&Q and Screwfix businesses in Britain experienced softer sales in the fourth quarter of its 2017-18 financial year.

The group highlighted weaker demand for “big ticket” purchases such as kitchens - often a sign consumers are feeling less confident about their prospects.

Britons’ discretionary spending is under pressure after several months of inflation running head of wage rises and because of economic uncertainty due to Brexit. Traditional store groups are also struggling with a boom in online shopping, while early March snow storms that hit demand too.

Separately on Wednesday, troubled floor coverings retailer Carpetright said it had secured new funds and would seek to close stores, while furniture retailer ScS said trading in the last seven weeks had softened.

Several other UK retailers are struggling. Last month, Toys R Us UK and electricals chain Maplin collapsed into administration, while baby goods group Mothercare warned on profit.

Creditors of fashion chain New Look will vote on Wednesday on plans to close 60 of its 593 UK stores.

Kingfisher said B&Q’s like-for-like sales fell 5.1 percent in the quarter to Jan. 31, while growth at Screwfix dipped to 7.1 percent, having been 10.2 percent in the previous quarter.

“Overall confidence is not great right now,” Chief Executive Véronique Laury told reporters.

“There is uncertainty around the UK economy and if inflation is higher than wage increases then that puts a bit of a stress on what consumers are prepared to spend their money on,” added finance chief Karen Witts.

Official data on Tuesday and Wednesday, however, showed UK inflation easing and wages growth picking up.


Shares in Kingfisher, up 14 percent over the last six months, were down 7.9 percent to 311 pence at 1020 GMT, valuing the business at 6.72 billion pounds ($9.46 billion).

“We think the UK home improvement market is slowing,” said RBC Europe analyst Richard Chamberlain.

“Major competitors Wickes and Bunnings have their own company specific challenges but even so as market leader we don’t think Kingfisher will be immune from this trend,” he said.

Kingfisher also trades as Castorama and Brico Depot in France and elsewhere.

Laury said the outlook for the French market was “encouraging yet volatile,” while the Polish market “remains supportive”.

Kingfisher made an underlying pretax profit of 797 million pounds in the year ended Jan. 31 - ahead of analysts’ average forecast of 783 million and 1.3 percent above the 787 million made in 2016-17.

The outcome reflected a weak performance in France offset by growth at Screwfix and in Poland. Sales rose 3.8 percent to 11.7 billion pounds and Kingfisher raised its dividend by 4 percent.

Kingfisher, which across Europe trails France’s Groupe Adeo, has just finished the second year of a five-year plan to boost annual profit by 500 million pounds from 2021.

The plan, costing 800 million pounds over five years, involves unifying product ranges across its various brands, boosting e-commerce and seeking efficiency savings.

Laury said good progress had been made and was confident the plan would be delivered.

She said it was too early to say what boost Kingfisher would get if its main UK rival, Bunnings/Homebase, exits the market.

Wesfarmers unit Bunnings’s 2016 purchase of Homebase has been a disaster. Last month, Wesfarmers took a $1 billion writedown on Homebase and said it was reviewing its future. It will update the market in June.

$1 = 0.7107 pounds Editing by Sarah Young and Mark Potter

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