All fingers are pointing at China for bringing big financial losses to Kingfisher plc, one of Europe and Asia's largest home improvement retail groups.
The company, which manages brands such as home improvement chain B&Q, announced its global third quarter trading update for the 13 weeks ended November 1, 2008. Group retail sales of GBP2.6 billion were flat, and retail profit of GBP176 million was down 4.0%.
In China, sales were down 28.7% and losses were GBP17 million reflecting the sharp fall in sales and the margin impact of initial stock clearance activity which began towards the end of the quarter. Four stores are now closed and one downsized in line with the store reorganization plan announced earlier in the year. As of November 1, 2008, Kingfisher now manages 65 stores and 10,259 employees in China.
The Chinese market continued to deteriorate and new apartment sales were again significantly down. The property slowdown has particularly impacted B&Q's home renovation business as half its sales were generated from internal design and fit out of new apartments.
Kingfisher's press release stated that the company believes the market slowdown shows no sign of imminent improvement and is likely to be weaker and last longer than previously anticipated. As a result, the new local management team, supported by Peter Hogsted, CEO of Kingfisher Other International, who joined from Ikea during the third quarter, are finalizing a more comprehensive repositioning plan than previously envisaged.