Kingfisher soars as B&Q enjoys the sunshine

B&Q has been cashing in on the sunny weather, helping its parent company to a big profit hike.

by
Last Updated: 06 Nov 2012

Kingfisher reported quarterly profits of £128m today for the 13 weeks to May 2, almost 40% up on last year’s figure (and well above City forecasts). The star performer in the portfolio was DIY chain B&Q: like-for-like sales were up 3.2%, including a 30% jump in sales of outdoor goods. An early Easter and the surprisingly good weather clearly persuaded more of us Brits to take to our back gardens to enjoy the spring sunshine, and this helped Kingfisher almost double its UK profits. It may still be a tough year for the group – but at least it seems to be heading in the right direction…

There’s no denying that the hot weather has been great for B&Q; this sales hike includes a 148% rise in barbecue sales, while it’s also shifted more gardening gear (vegetable seed sales were up 43%, which suggests more of us may be trying to re-create The Good Life as part of our new Age of Austerity). By contrast, non-seasonal item sales fell nearly 2% on a like-for-like basis – although like rival Travis Perkins (which owns Wickes), B&Q’s figures seem to have been boosted by the collapse of MFI, which has taken a big competitor out of the market.

It wasn’t all good news from Kingfisher though. Its Chinese arm continues to be a money pit, with losses increasing to £14m last quarter. This was partly due to the cost of scaling back its B&Q operation – Kingfisher decided earlier this year to close down a third of its Chinese stores, in a bid to stop the rot. But sales are still falling: there was a 24% drop last quarter, which meant that overall group sales were actually down nearly 2%. The Chinese housing market may be showing signs of life again, but not so much that the burghers of Beijing are popping out for a new bathroom yet.

So it was no surprise that Kingfisher CEO Ian Cheshire was being cagey today, warning against any talk of recovery and suggesting that it would be hard to maintain this kind of performance throughout the year. After all, even if Britain does enjoy some lovely summer weather, the difference from last year is unlikely to be as marked (plus the current quarter had Easter in it last year).

But let’s look on the bright side: B&Q’s turnaround plan seems to be on track, and it’s encouraging to see that the retailer has apparently boosted profit margins 0.8%, by streamlining its supply chain and stock control processes. That’s the kind of improvement that will stand it in good stead whatever the weather, and is presumably one of the main reasons why Kingfisher’s stock has been soaring today...



In today's bulletin:

LDV driven to administration after Weststar U-turn
Ryanair in the red - but clearer skies ahead
Kingfisher soars as B&Q enjoys the sunshine
Micro-businesses fall through the training gap
Seven ways to... nurture survivors

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today