Kingfisher downbeat on France's 2014 prospects

Reuters

By James Davey

LONDON (Reuters) - Kingfisher (LSE:KGF), Europe's biggest home improvement retailer, highlighted contrasting growth prospects for 2014 in Britain and France as it posted third-quarter profit at the lower end of forecasts, blaming a tough French market.

Shares in the group, which trades from 1,082 stores in nine countries in Europe and Asia, fell up to 6.6 percent on Thursday after it said there were no obvious signs in France of an imminent improvement in consumer confidence.

France, where Kingfisher trades as Castorama and Brico Depot, is the group's most profitable market.

Chief Executive Ian Cheshire said there was a stark contrast between the outlook for Britain and for France, pointing to UK unemployment of 7.6 percent as opposed to over 11 percent in France and a UK housing market that is growing as opposed to a French housing market that is declining.

"You've got belief (in Britain) that things will be better next year which is not the case in France," he told reporters.

Analysts at Cantor Fitzgerald cut their 2013-14 pretax profit forecast to 745 million pounds ($1.21 billion) from 755 million pounds and their forecast for the following year by a similar amount, saying they saw limited upside to both earnings and margins in France.

Kingfisher, which also runs the B&Q and Screwfix chains in Britain, made a retail profit of 271 million pounds ($441 million) in the 13 weeks to November 2 - an increase of 1.7 percent on a constant-currency basis.

That compared with analyst forecasts in a range of 271 to 285 million pounds, with a consensus of 280 million.

Total sales rose 8 percent to 2.92 billion pounds, with sales at stores open over a year up 1.4 percent.

In France like-for-like sales were flat and retail profit fell 5.6 percent, impacted by a slightly lower gross margin percentage in a more price-promotional environment.

Like-for-like sales in the UK & Ireland increased 2.0 percent, while retail profit was up 8.3 percent, driven by growing demand at the construction end of the home improvement market, assisted by government initiatives to stimulate Britain's housing market.

B&Q and Screwfix also got a boost to trade after a severe storm hit Britain in October, with sales of fence panels up 41 percent year-on-year in the week after the storm.

Kingfisher saw sales growth in each of its other international markets, including Poland, Germany and China.

The group is Europe's biggest home improvement retailer in terms of sales and No.3 in the world behind U.S. groups Lowe's (LOW.N) and Home Depot (HD.N).

It has offset weak demand in many of its markets with a "self help" drive to improve profitability by buying more goods centrally, and directly, from places like China.

"Looking ahead, we remain ready to capitalise on any improvement in conditions or opportunities as they arise," said Cheshire, adding he remained "enthusiastic about our longer-term prospects."

Shares in Kingfisher, up 39 percent this year before Thursday's update, were down 21 pence at 374.5 pence at 1103 GMT, valuing the business at 8.9 billion pounds. ($1 = 0.6144 British pounds)

(Reporting by James Davey; Editing by Rhys Jones and Pravin Char)

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