Lower sales in France weigh on Kingfisher's growth

By James Davey

LONDON (Reuters) - British home improvement retailer Kingfisher missed forecasts for sales growth in its latest quarter, held back by the weak performance of its French businesses.

Shares in the group were down 2.5% at 0818 GMT on Wednesday, extending year-on-year losses to 19%, after it said like-for-like sales rose 0.8% in the three months to April 30, its fiscal first quarter - below analysts' consensus forecast for growth of about 1.6%.

Kingfisher, whose main businesses are B&Q and Screwfix in Britain and Castorama and Brico Depot in France and elsewhere, is in the fourth year of a five-year programme that was designed to boost earnings. However, profits went backwards in its 2018-19 year and the group said in March it would part company with Véronique Laury, its CEO since 2014.

Despite Laury's planned departure, the group is sticking to her strategy. Costing 800 million pounds over five years, it involves unifying product ranges across brands, boosting e-commerce and seeking efficiency savings.

The group was up against weak comparative numbers in its first quarter. In the same period last year group like-for-like sales fell 4% as adverse weather dented demand.

This year, first quarter like-for-like sales rose 3.4%, 6.2% and 24.6% in the UK & Ireland, Poland and Romania respectively but were down 3.7% in France.

"We think France sales have been affected by continued range disruption and as the digital offer is taking time to ramp up," said RBC Europe analyst Richard Chamberlain, who has an "underperform" rating on the stock.

"We still see a high risk of a potential margin rebase by a new CEO, particularly in France," he said.

Total group sales were 2.8 billion pounds in the quarter, up 1.7%.

Kingfisher said its expectations for the full year were unchanged. Prior to Wednesday's update, analysts' average forecast for 2019-20 underlying pretax profit was 671 million pounds, down from 693 million pounds made in 2018-19.

The group is also holding an "Innovation Day" for investors and analysts on Wednesday, where it will demonstrate new products and services as well as a new convenience store format.

Kingfisher is launching several new ranges this year which it hopes will differentiate it from competitors, including surfaces, décor and bathrooms across the group, and kitchens in B&Q.

(Reporting by James Davey, Editing by Paul Sandle and Mark Potter)