Consumer spending gloom depresses Kingfisher’s profits |
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Fri, 27 May 2005 07:40
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The plunging consumer-spending eagle added yet another huge prey to its retail store list, by claiming the DIY chain owner, Kingfisher as it reported first quarter profits that fell 15.6% to land at £125.9m.
Notifying that its French and UK businesses were facing rough weather, Kingfisher Plc.’s shares closed at 257p following their underperformance in the FTSE 100 index by a total of about 18% over the past year.
Owner of top DIY stores in Europe, Kingfisher sent shock alarms in the earlier month, warning of the dampening consumer demand that, in all probability, could afflict quarterly results.
While like-for-like sales sank 5.6% during the first quarter, earnings at Kingfisher’s UK home improvement store, B&Q, reduced 7.7% following the downturn in consumer spending. Meanwhile, like-for-like sales at its French store, Castorama, dropped 4.4%.
| Gerry Murphy, chief executive of Kingfisher acknowledged plummeting profits in the first quarter, and said, “With the key summer season still to come, it is too early to judge the outlook for the full year. However, trading in the first three weeks of the second quarter continues to be challenging in the UK and France.”
In the B&Q arm of Kingfisher, sales of garden products were affected the most since they constituted almost 40% of the store’s proceeds. Moreover, the unexpected early Easter along with the poor spring weather worsened the already feeble sales of kitchens, bedrooms and bathrooms.
Besides consumers tightening their belts, other reasons that Kingfisher held responsible for its dreary sales were high interest rates, high taxes and pension contributions along with surging fuel prices. Other retailers like the apparel chain, Next and merchandise store, Argos, joined Kingfisher in its finger pointing as frequent interest rate rises caused mortgage repayments to jump after the end of the fixed term, which indeed left the consumer with a shrunk wallet and thereby, fewer visits to these stores.
Murphy was also careful to declare in a conference call subsequent to the result proclamation that all assumptions of Kingfisher selling its B&Q DIY retail chain were baseless and no disintegration or demerging of the chain was on the cards. He was quoted as saying, “We have no plans to break up the business, and we're not talking to anyone about this.”
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