July 24 (Bloomberg) -- Kingfisher Plc fell the most in almost six years in London trading after Europe’s largest home-improvement retailer reported a steeper drop in second-quarter revenue than analysts expected, led by weaker sales in France.
The shares dropped as much as 7.7 percent, the steepest decline since Dec. 1, 2008. They were down 6.6 percent at 313.8 pence as of 8:20 a.m., cutting Kingfisher’s market value by more than 500 million pounds ($852 million) to 7.4 billion pounds.
Sales at stores open at least a year fell 1.8 percent in the 10 weeks ended July 12, the London-based company said today. Same-store revenue at France’s Castorama chain fell 0.9 percent, compared with a median estimate of a 1 percent gain.
The quarter “was always expected to be more difficult, annualizing a very strong” performance last year, said Chief Executive Officer Ian Cheshire. France and Poland “have been slower than anticipated” and it is “unclear whether this recent weakness is short-term phasing in nature.”
Cheshire signaled on May 29 that profit growth will slow from a 20 percent jump in the first quarter. Even so, the company had expected sales in its main markets to rebound this year, as the recovery from Europe’s sovereign-debt crisis gains traction and the U.K. economy improves.
Same-store sales in the U.K. fell 1.3 percent in the quarter, compared with the median estimate for a 1 percent drop.
The share slide is “probably bigger than the reduction to consensus will be, but management tone is pretty cautious on demand, particularly in France, so people will be nervous,” Sanford C. Bernstein analyst Jamie Merriman said by e-mail
For now, Kingfisher will accelerate cost cutting to “help support our second-half performance,” Cheshire said. The company cited a slowing housing market in France and fewer promotions in the U.K. for the slowdown. In Poland, strong sales in the first quarter damped demand for Kingfisher products in the past three months, the company said.
Gross margins in France and the U.K. were stronger in the quarter, the retailer said.
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