B&Q building steady growth but warns of tougher times ahead

B&Q owner Kingfisher has shrugged off the tough retail climate with a 23 per cent rise in underlying interim profits, but the retailer joined others yesterday in warning that the outlook would remain testing.

After posting a rise in underlying group pre-tax profits to 354 million from 288m last time, Ian Cheshire, chief executive, said: "The immediate outlook for consumer spending is fragile, particularly in the UK where it is likely to remain challenging for some time."

The company, which as well as running Britain's biggest DIY chain also owns the Castorama and Brico Depot chains in France, said total retail profits lifted 15.7 per cent to 402m in the six months to end-July from 347m last time.

Kingfisher's profits in the UK and Ireland climbed 15.8 per cent to 171m as profit margins improved, but total sales were down 3 per cent to 2.3bn "in a declining home improvement market affected by weak consumer demand for bigger ticket home project spending".

B&Q's same-floorspace sales in the UK and Ireland were off 3.7 per cent. Its sales of outdoor products fell 1 per cent in "mixed weather", while sales of kitchens, bathrooms and bedrooms slid 6 per cent "reflecting fewer (price) promotions and weak consumer appetite for bigger ticket purchases".

Kingfisher said B&Q UK's gross profit margin rose sharply by 1.4 per cent driven by more direct sourcing, a further reduction in shop "shrinkage", or product pilfering, and fewer promotions.

Kingfisher also performed well overseas despite a challenging economic environment, with profits up 21 per cent at 71m. "Profit growth in Spain and Turkey, and a halving of China losses more than offset a slight profit decline in Poland," the group said. Margins in France were up 1 per cent.

Cheshire added: "Our continued profit growth will come from our well-established self-help initiatives, including sourcing more products through our global network and vigorously driving operating cost efficiencies." He said the company was sourcing more product from cheaper manufacturing centres like China. The dividend is held at 1.925p.

The company plans to revamp 16 of its larger stores in the UK during the second half, and also to spruce up another 30 showroom areas of kitchens, bathrooms and bedrooms.

Kingfisher said it was also benefiting from investment in new products, such as a space-saving eco-toilet with a built-in washbasin.

Kesa, the third-biggest electricals retailer in Europe that owns Comet in Britain and Darty in France, outstripped City forecasts for first-quarter sales yesterday.

The company's like-for-like sales rose 4.3 in the three months to end-July, getting a double-barrelled boost from strong demand for TVs ahead of the football World Cup and more sales over the internet.City analysts had forecast a consensus sales rise at Kesa of 2 per cent.

Like-for-like sales at Comet rose 4.3 per cent, were up 5.1 per cent at Darty, and 1.1 per cent ahead at Kesa's other established operations in Holland and Belgium.

Kingfisher's shares closed up 0.9p at 219.8p, while Kesa rose 2.1p to 137.5p.