Profits at B&Q owner, Kingfisher (KGF.L) dropped by nearly a third as the boom in the pandemic lockdown home improvements ends, and rising prices hit household budgets.
Shares in the FTSE 100 (^FTSE) group slipped as much as 5.2% following the first half results on Tuesday.
The DIY chain, which also owns Screwfix, reported pre-tax profits fell by 30% to £474m ($543m) in the six months to 31 July, down from £677m a year earlier.
Richard Hunter, head of markets at interactive investor, said: "Despite an initial bounce in early trade, the share price reaction is a clear indication of the decision investors have made, with the price having fallen by 33% over the last year, as compared to a gain of 4.8% for the wider FTSE100.
"Nor does the pressure ease on what could be an extremely challenging outlook as economic conditions continue to deteriorate — the market consensus of the shares as a sell suggests not only a tough time to come, but also perhaps better prospects elsewhere."
Sales dropped 4.1% to £6.8bn in the six months to July, Kingfisher said, adding that revenues were 16.6% ahead of their level three years ago.
Meanwhile, sales of insulation products, such as loft insulation, jumped as people try to cut their energy bills this winter. Across the group, insulation sales rose 70% from 2019, and 32% higher than in 2021.
However, the company said that sales were still "significantly" ahead of pre-COVID levels, adding that it was investing for "further growth" in e-commerce and expanding in Poland.
"Kingfisher has delivered a very resilient first half of sales. While facing very strong comparatives from the prior year as well as a more challenging environment," chief executive Thierry Garnier said.
The company also warned it expected inflationary pressures to continue into the second half of 2022, even though raw material prices have fallen back from record highs and freight costs have slowed.
"Looking to the months ahead, although trading in the year to date has been in line with our expectations, we remain vigilant against the more uncertain economic outlook for the second half," he added. "We are therefore focused on delivering value to our customers at a time when they need it most."
Kingfisher's results on Tuesday reflect the tough times ahead of Britain's retail sector as the cost of living crisis eats into consumer spending, and companies battle with the rising cost of raw materials and supply chain pressures.
Separate figures showed that UK retail sales declined at the sharpest pace in eight months in August as consumers cut back on spending as inflation runs near 40-year highs, heightening the risk of a recession.
Russ Mould, investment director at AJ Bell, said: "DIY stores benefited from two key things during lockdown. First they were, unlike many other retail businesses, able to trade from their physical premises.
"Second, people stuck indoors for long periods of time took a look at tired décor or that home improvement project they had put off and decided now was the time to ‘B&Q it’ as the slogan goes.
"Arguably both of those positive tailwinds have disappeared while at the same time the powerful headwind of a cost of living crisis has made it extremely difficult for Kingfisher to make any headway."
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