By Sarah Young
LONDON (Reuters) - Kingfisher (L:KGF), Europe's second largest home improvement retailer, said prolonged warm weather lifted sales but the weak performance of its French business Castorama darkened its outlook.
A warm summer helped group underlying sales rise 1.6 percent in the three months to July 31, Kingfisher's second quarter, with hosepipes and fans in particular demand. The sales rebounded from a 4 percent decline in the first quarter, when winter snow storms had hurt the business.
Kingfisher said it was on track to deliver on its "strategic milestones" for this year, but its shares dropped 3 percent to 280 pence after the trading statement as analysts said that struggling Castorama, where quarterly underlying sales fell 3.8 percent, would weigh on annual results.
"A solid second quarter update in a tough backdrop, which will likely see a modest slippage in full-year consensus...as the Castorama shortfall is reflected," Jefferies analysts said.
Kingfisher said it was pleased with the recovery at its B&Q and Screwfix businesses in Britain and that it would take steps to improve Castorama.
"The performance of Castorama France has been more difficult and as a result we have put additional actions in place to support our full year performance in France with the benefits expected to come through in the second half," Chief Executive Veronique Laury said in a statement on Thursday.
Kingfisher, which across Europe trails France's Groupe Adeo, is in the third of a five-year plan to boost annual profit by 500 million pounds from 2021. Laury said she would provide a more detailed update at half-year results in September.
SECTOR STRUGGLES
Interactive Investor's head of markets Richard Hunter called Kingfisher's performance in France "something of a concern", and added that the company's share price has recently tended to focus on the negatives.
The London-listed stock has lost 23 percent over the last six months, compared to a 3 percent rise in Britain's bluechip index (FTSE), of which it is a constituent.
That share price fall comes amid struggles across the home improvement sector as a whole in Britain in recent months, with rival Homebase shutting stores and Wickes, owned by Travis Perkins (L:TPK), warning of tough trading, due to weak sales of kitchens and bathrooms.
B&Q reported hosepipes and sprinklers sales rose by 400 percent, while sales of charcoal for barbecues were up 75 percent. The business also sold out of paddling pools and shifted 305,000 fans.
Hargreaves Lansdown (LON:HRGV) said it was worrying that Kingfisher's sales in Britain were "more a function of a scorching summer than any underlying progress", saying the pressure was on the group to deliver.
