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Kingfisher First-Half Earnings Drop Due to Weak Demand in Britain

8:15AM ET 9/18/2019 MT Newswires
Kingfisher (KGF.L), a British home improvement retailer, reported early on Wednesday underwhelming fiscal first-half results as consumer weakness in the UK coupled with a hit from an ongoing organizational transformation weighed on sales and underlying earnings.

Total sales slipped by 0.9% at constant currency to 6.0 billion pounds ($7.47 billion) during the six months that ended July 31, from 6.08 billion pounds a year ago, the firm, whose main brands are B&Q and Screwfix in the UK and Castorama and Brico Depot in France, said in an earnings statement. Like-for-like revenue was down by 1.8% excluding the exchange rate effects.

Kingfisher said sales in France and the UK, which together account for the vast majority of group turnover, fell by 4.2% and 0.7%, respectively, because of a "weak" consumer backdrop in the UK and disruption caused by the implementation of a new range at B&Q.

Revenue was also hit due to some "transformation-related issues" at Castorama in France, which along with the rest of the company is in the fourth year of an organizational overhaul that has seen the unification of 59% of the company's product ranges.

Screwfix sales in the UK, however, surged by 9.9%, blunting the impact of the 3.3% decline at B&Q, which is twice as big in terms of revenue generation.

In line with subdued group revenue, underlying pre-tax profit also fell in the fiscal first half, declining to 353 million pounds from 377 million pounds a year earlier, a decline of 6.4% on a reported basis.

Looking ahead to the full-year 2020, which will see introductions of new and "differentiated" product ranges, the company sounded a cautionary note, saying the outlook by geography remained "mixed," with continued uncertainty around demand in the UK, which is mired in deep political turmoil ahead of its planned exit from the European Union on October 31.

"Our transformation activity continued in the first half, including new range launches and the rollout of further capabilities within our unified IT platform," outgoing Chief Executive Officer Veronique Laury said. This resulted in "some ongoing disruption that impacted sales at B&Q and Castorama France" partly offset by Screwfix, which continues to grow its market share, she added.

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