B&Q's troubles mount in the UK as Irish stores do well

DIY SectorDIY chain B&Q continues to cause problems for parent company Kingfisher with a 50 per cent slide in profits in Britain. Yet Kingfisher remains happy with B&Q's performance here in Ireland where new stores continue to open apace.

There was disquiet in Britain last Wednesday when the 320-strong DIY chain returned figures showing a 50 per cent decline in profits.

Kingfisher's chief executive, Gerry Murphy, insisted the decline was due to a sharp downturn in home-related spending and not anything the company itself was doing. Market conditions were the "biggest single factor" in the performance figures, he said.

He suggested it was a "cylical rather than a seasonal downturn", something that had prompted a major overhaul of the business last autumn.

There was a sharp downturn in operating profits for B&Q here when results were released last December, but this drop was put down firmly to the cost of opening four new outlets here during 2005 and, in particular, a large unit in Swords, Co Dublin, explained Kingfisher spokesman, Nigel Cope.

The company's Irish units provided a 23 per cent increase in sales to €57.8 million, but operating profits slumped 25 per cent to €3.72 million.

The new Swords store was largely responsible for this, given it opened in December and so only made a small contribution to the figures for the year.

"It was the cost of the stores opening rather than turnover," Mr Cope said. "We opened four new stores last year, bringing the total to seven, and they are performing very well."

B&Q came to Ireland in March 2002 when it opened a large warehouse at the Liffey Valley Centre in west Dublin. It followed with a mini-warehouse in Tallaght in October 2003. Since then outlets have opened in Cork, Limerick, Naas and Athlone.

Sales figures remain strong here, Mr Cope said, but not so in Britain where the decline is pulling down Kingfisher's overall performance. Mr Cope put this downturn to a number of factors, including "a broad downturn in consumer spending".

There may also be somewhat less confidence in the property market there than in Ireland, he added. "There is slightly more fragile confidence in the housing market leading to consumers reining in spending."

This made investors less willing to go out and buy the flat pack kitchen or invest extra cash into their properties.

The DIY chain is active here, buying goods from Irish suppliers at something approaching €300 million per year. It also plans to continue opening new outlets with employment levels expected to pass 1,600 over the coming few years.

B&Q's performance in Britain dragged group profits down 64 per cent to €341.2 million after an exceptional charge of €316.2 million related to last autumn's major restructuring.

Before the one-off costs, profits came in at €658.8 million, about €441.2 million below the level annalists were expecting 12 months ago. Overall group sales rose by 4.7 per cent to €11.8 billion, with underlying sales down 2.2 per cent.