May 30 (Bloomberg) -- Kingfisher Plc, Europe’s largest home-improvement retailer, reported a steeper drop in first-quarter earnings than analysts anticipated as cold March weather delayed the start of the gardening season.
So-called retail profit fell 28 percent to 114 million pounds ($173 million), the London-based owner of the Castorama and B&Q chains said today. That compared with the 144 million-pound median estimate of 11 analysts surveyed by Bloomberg News. The shares fell as much as 4.5 percent, the most in nine months.
Kingfisher gets most of its revenue from the U.K. and Ireland, where same-store sales fell 4.7 percent, and France, where they declined 5.6 percent. Business improved toward the end of the quarter as the weather warmed up, Chief Executive Officer Ian Cheshire told a conference call, pointing to signs of improvement amid increased interest in U.K. house purchases.
“It may be that the company’s poor results reflect more than just the poor weather,” said Peter Saville, a partner at advisory firm Zolfo Cooper, by e-mail. “With the housing market only just starting to show real signs of life and consumers still reluctant to spend on non-essential big ticket items, it is not surprising that home-improvement chains are suffering.”
The shares were down 0.2 percent at 327.1 pence as of 10:23 a.m. They pared earlier declines after Cheshire said he was encouraged by an improvement in the weather and “glimmers of light” in Britain’s housing market.
U.K. house prices increased the most in 18 month in May, figures from Nationwide Building Society showed, while mortgage approvals probably increased to 54,600 in April from 53,504 in March, according to a Bloomberg News survey of economists.
That should help stimulate purchases of home-improvement items, after an “abrupt” period of cold weather in March and the first two weeks of April, Cheshire said.
The first quarter was “very spikey” in terms of weather, the CEO said. “If we don’t get any other unexpected bumps in weather, we’re in reasonable shape,” for the rest of the year.
Sales of outdoor products such as garden furniture declined by 10 percent in the quarter, the retailer said.
The U.K. outdoor business, which represents more than 30 percent of sales in the quarter, fell 10 percent with greenhouses down 32 percent and bedding plants down 8 percent, while tiling sales rose 2 percent as people stayed indoors.
The market for smaller tradesmen was more resilient, the company said. Eight Screwfix stores were added in the quarter, taking the total to 283, Cheshire said.
“Time is running out for Kingfisher to avoid another profit fall in the first half,” Philip Dorgan, an analyst at Panmure Gordon, said by e-mail. The first-quarter performance was “quite a miss.” He rates Kingfisher buy.
Cheshire said he’s “comfortable” with analyst estimates for full-year pretax profit of 772 million pounds and is sure of a first-half profit as the retailer claws back sales of some seasonal items in second quarter.
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