Yahoo Finance Kingfisher sales held back by French division and business transformation costs
Shares in Kingfisher slumped as much as 7pc on Wednesday after the B&Q and Screwfix owner reported stalling sales in its French business.
While sales in the UK and Ireland were up 3.5pc to £1.27bn in the three months to the end of April, French sales dipped 5.5pc on a like-for-like basis to £1.09bn. Overall sales were dragged down 0.6pc to £2.86bn as a result.
The firm’s share price fell by as much as 7.04pc on Wednesday to 333.9p.
Kingfisher is in the midst of an £800m overhaul of the business, which includes a revamp of its IT systems and online presence, as well as simplifying stock across divisions and reducing the number of suppliers to increase its buying clout.
In the long run, the changes are expected to net Kingfisher around £500m more in profit each year by 2021. However, there were signs on Wednesday that the changes were proving more problematic and costly than anticipated.
Chief executive Véronique Laury said there had been some “business disruption” while the company clears old ranges and brings in new products.
During the last year, the UK business has benefited from a weaker pound and stellar sales from Screwfix, which in the last quarter surged by 20.3pc thanks to a number of new stores. In contrast, Kingfisher has closed a number of B&Q shops in order to consolidate its portfolio.
Kingfisher’s French brands, Castorama and Brico Dépot have struggled for some time, with Ms Laury warning in the previous quarter that she "remained cautious" about the outlook for Kingfisher's trading in the country.
Paul Moran, head of research at Northern Trust Capital Markets, said: “Management said last quarter that France was weaker because of pre-election uncertainty, now the rationale is about disruption from transformation which frankly makes more sense to us, however this might be a drag on a post-election recovery.”
However, Ms Laury said the company remains on track to meet its milestones in the second year of its transformation plan.
“We remain confident in the size of the prize and our ability to deliver our long term plan, both the financial benefits of the transformation and the benefits to customers, supported by the continued expertise and energy of our colleagues."
