B&Q's profits squeezed as promotions cut too deep

B&Q owner Kingfisher said cut-price promotions and customers buying less profitable items were behind it narrowly missing first-quarter trading forecasts.

Profit margins were also squeezed at the DIY chain after it was forced to make multiple deliveries to customers because components for their kitchens did not arrive at the warehouse at the same time.

'It's coming gnome': B&Q is hoping for big sales from a range of World Cup merchandise

'It's coming gnome': B&Q is hoping for big sales from a range of World Cup merchandise

At the close yesterday, Kingfisher shares had fallen 5 per cent, or 20.3p, to 397p.

While the underperformance was disappointing, the profit figures were still relatively strong.

Underlying operating profit rose to £142million for the 13 weeks to May 3, just below the £145million analysts were expecting.

Chief executive Ian Cheshire said: ‘It was a £3million miss on £145million, so not catastrophic. The shares have had a good run.’ Group sales at stores open more than a year rose a healthy 6.1 per cent.

Much of the strong performance came from the UK and Poland, whereas the Castorama brand in France has been wrestling with economic malaise in the Gallic economy.

Cheshire admitted that the firm may have gone too far in discounting kitchens and bathrooms, adding Kingfisher had also been hit by a shift towards low margin items such as plants.

Over the quarter, B&Q sold 35 per cent more summer bedding plants and 70,078 Mother’s Day orchids. It is now hoping for big sales from a range of World Cup merchandise, including an  ‘It’s coming gnome’ garden figurine.

 

Veteran retail analyst Nick Bubb said: ‘All the three big markets have done well, including Poland, but  “Other International” is disappointingly flat overall.

‘The group underlying sales increase was “only 6 per cent” rather than the hoped for 7 per cent/8 per cent, with B&Q in the UK just under 10 per cent like-for-like, which ought to have been better.

‘Investors will be pleased to hear that around £100million of surplus cash is to be returned to them via a special dividend  of 4.2p a share.’