B&Q owner warns of falling profit

Kingfisher is the latest store group to complain of slower trading

Kingfisher, the owner of the B&Q home improvement chain, has said it expects first-quarter retail profits to fall by 15%, citing poor UK and French sales.

Its comments are the latest sign of a slowdown in UK consumer spending, coming a day after leisure group Whitbread said that trading was tough.

But the UK store group also announced it would be expanding its operations in the growing Chinese market.

At the close, Kingfisher shares were down 17.75 pence, or 6.5%, at 254.25p.

Kingfisher said like-for-like sales in the three months to 30 April were likely to be down by 6%.

Overall sales in the period were expected to be broadly flat compared with a year ago, it added. It will release its quarterly results on 26 May.

Hard-won

Demand is weak in the UK and any sales growth will be hard won in very competitive markets Gerry Murphy, Kingfisher chief executive Kingfisher's share price

A number of High Street retailers, including Woolworths, Marks & Spencer and Boots, have recently warned of difficult trading conditions.

The British Retail Consortium has also said consumer confidence remains "cautious", while data from the Office for National Statistics indicated a slowing in demand for furniture, electrical and DIY goods.

"Whilst it is too early to judge the full year, it is clear that demand is weak in the UK and any sales growth will be hard won in very competitive markets," said Kingfisher chief executive Gerry Murphy.

Kingfisher said higher taxes, debt costs and inflation had lead to "very tough" trading conditions in the UK.

Poor spring weather and early Easter posed additional challenges in its key UK and French markets, it added.

It had warned in March of a slow start to 2005 because of cold weather in Europe.

Kingfisher runs the Castorama chain of DIY stores in France, Italy and Poland.

Asian expansion

Kingfisher also announced it was to buy Chinese DIY retailer OBI Asia Holding for an undisclosed sum. OBI currently has 13 stores in China with a further five due to open in 2005

Kingfisher's first store in China opened in 1999 and it currently has 22 outlets and annual sales of £212m ($403m).

"The addition and conversion of OBI's stores will significantly accelerate B&Q China's growth," Kingfisher said.

The group also has 19 stores in Taiwan and its first site in South Korea is due to open later this year.