Shares in Kingfisher are on the up, but Rodney Hobson isn't impressed.
Investors have found more comfort than I do in today's figures from B&Q DIY sheds owner Kingfisher (LSE: KGF).
It is admittedly encouraging that UK sales have picked up and margins have improved, but the sales increase of 5.1% in the 10 weeks to 12th July is due largely to the opening of more Screwfit trade counters.
Also B&Q saw sales of seasonal categories rise nearly 20% compared with the same weather-affected period last year.
UK like for like sales were still down 0.5% despite a considerable improvement on the dire 7.9% drop earlier.
There is no disputing the better performance compared with the first 13 weeks for the current financial year. It means that total UK sales over 23 weeks are now just in positive territory while the drop in like-for-likes is reduced to 4.7%, which is quite bad enough.
More than half of sales now come from outside the UK and the situation has been rather less dire in France, the second largest market, where Kingfisher trades as Castorama and Brico Depot.
Rather more worrying is the sharp slowdown in the rest of the empire, consisting of outlets in Poland, China, Italy, Spain, Ireland and Russia. This has been the area of growth while the mature markets have stagnated.
Overseas sales growth has scaled back to 4.8% despite the boost from opening 24 new stores and like-for-like sales are down a worrying 4.7% in the latest 10 weeks.
Meanwhile chief executive Ian Cheshire admits that the UK market remains ‘extremely tough’. Sales of indoor products at B&Q, which are less affected by seasonal factors, have continued to fall.
Kingfisher shares have tumbled from 280p in April last year to below 100p after the woeful first quarter trading statement issued at the beginning of June but have picked up over the past few days and this morning they jumped 13p to 130p.
Cheshire promises that the problems are being dealt with and he may be right but investors are being asked to take an awful lot on trust.
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Rodney Hobson is author of Shares Made Simple, a beginners guide to the stock market, published by Harriman House.
