Kingfisher's sales growth held back by soft French market

By James Davey

LONDON (Reuters) - Kingfisher (KGF.L), Europe's largest home improvement retailer, said sales growth slowed in its third quarter, with a soft French market offsetting a robust performance in Britain and Poland where trading conditions are more favourable.

Shares in the firm, which trades as Castorama and Brico Depot in markets including France and B&Q and Screwfix in Britain, fell up to 3 percent on Tuesday after it reported underlying sales in France fell 3.6 percent in the three months to Oct. 31, its fiscal third quarter.

Kingfisher blamed France's weak economy and a reduction in promotional activity at Castorama for the outcome.

"France will now have now seen like-for-like sales decline for five years by the end of the current year, even without the incursion of large scale online (competitors) in the DIY market," said Tony Shiret, analyst at Haitong Research, who has a "sell" rating on Kingfisher.

The group's performance in France contrasted with the outcome in Britain and Ireland, where like-for-like sales increased 5.8 percent, driven by a 12.7 percent rise at Screwfix that reflected well received new and extended ranges.

B&Q's like-for-like sales were up 3.5 percent - a sixth straight quarter of growth.

Sales in Poland rose 6.7 percent, benefiting from supportive market conditions, including a rise in state benefits.

Kingfisher has not seen any clear impact on UK demand since Britain voted to leave the European Union in June.

NEW STRATEGY

In January Chief Executive Véronique Laury detailed a strategy to boost Kingfisher's annual profit by 500 million pounds from 2021 that will cost 800 million pounds over five years to deliver.

The plan involves unifying the product ranges offer across the business, improving e-commerce capabilities and driving efficiencies. The company is the world's third largest home improvement company behind U.S. firms Lowe's (LOW.N) and Home Depot (HD.N).

"We continue to make good progress...and remain on track," said Laury.

Total group sales rose 11.5 percent to 3.0 billion pounds, with like-for-like sales up 1.8 percent, slowing from growth of 3.0 percent in the previous quarter.

The firm also plans to return 600 million pounds to shareholders over the next three years through share buybacks. It has so far returned 182 million pounds.

For Kingfisher's 2016-17 year analysts are on average forecasting an underlying pretax profit of 773 million pounds versus 686 million pounds in 2015-16.

Shares in Kingfisher, up 12 percent so far this year, were down 8.6 pence at 361 pence at 0946 GMT, valuing the business at 8 billion pounds. ($1 = 0.8011 pounds)

(Editing by Kate Holton/Keith Weir)