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Kingfisher hopes football will lift shoppers' gloom

Source: Reuters - Thu 3rd Jun 2010

Kingfisher, Europe's biggest home improvements retailer, is looking to the World Cup tournament to offset consumers' gloom about higher taxes as it overcame bad weather to post higher first-quarter profits.

The group, which runs market leader B&Q in Britain, said it had almost sold out of a garden gnome dressed in the England team kit ahead of the tournament kick-off next week and was also selling wheelbarrows and gazebos decked with the England flag.

"I'm also sure that some of the effects of the World Cup will prompt people to buy the odd barbecue late on," Chief Executive Ian Cheshire told reporters on Thursday.

Kingfisher, which also runs the Castorama and Brico Depot chains in France, said retail profit rose 15 percent to 146 million pounds in the 13 weeks ended May 1, broadly in line with analysts' expectations.

Sales at stores open at least a year fell 1.8 percent in the fiscal first quarter as severe winter weather hit sales of building products at the beginning of the period and a late spring also held back demand for garden plants.

That was more than offset by higher profit margins, however, as the group continued to benefit from its business improvement plans, which include buying more products centrally and directly from cheaper manufacturing centres like Asia.

At 8:30 a.m., Kingfisher shares were up 2 percent at 228.2 pence, just ahead of a 1.5 percent rise in the STOXX 600 European retail index.

Arden Partners analyst Nick Bubb was impressed, but didn't expect any upgrade to full-year profit forecasts amid a weaker euro and worries about continued losses in China.

"The euro at 1.20 will put some pressure on French earnings translation in H2 and the recent moves in China by the authorities to cool down the housing market don't augur well for the expected move into profit," he said.

UNCERTAINTY Kingfisher, which runs over 830 stores in eight countries, said it expected trading conditions to remain tough, with governments across Europe looking to cut debt.

In particular, consumers in Poland - a key growth market in recent years - appeared to have turned more cautious amid worries about unemployment, he said, though he added it was hard to draw firm conclusions as trading there had also been hit by flooding and mourning over the death of the president.

Much of the problem for consumers and businesses alike was uncertainty, Cheshire said, adding he hoped this would lift in Britain following an emergency budget on June 22.

"I think customers can deal with it (austerity measures), once they know what's in front of them, as can businesses," he said on a conference call.

Sales at stores open at least a year fell 2.8 percent in the UK and Ireland, and were down 8.1 percent in Poland, although the rose 0.2 percent rise in France.

Kingfisher said it was stepping up its investment in building products at B&Q, where it is also rolling out specialist Trade Point counters in larger stores.

It announced a 25 million pound makeover for its joinery, power tools, hand tools, electrical and plumbing aisles, and said it would launch over 4,000 new building-related products.

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