Although market expectations had been for a fall, the drop of 1.6% in Kingfisher’s first-half profits has caused the share price to slide by almost 2% in this morning’s trading. Although at face value the news that UK unemployment has dropped to 7.7% would be regarded as good news for the predominantly UK-based retailer, the worse-than-expected increase in average earnings has highlighted the diminishing spending power of the British consumer. As many households tighten their purse strings, the result has been a reduction in the number of bigger items sold at both B&Q and Screwfix. It seems the average man or woman on the street does not have the confidence to spend money on new bathrooms or kitchens, even with borrowing rates so low.
Kingfisher has been able to reduce many of its running costs by introducing a more centralised buying process. Along with this new buying structure, it has also been able to source cheaper materials from Asian suppliers.
However, one aspect that unfortunately is beyond the firm’s control has been the weather. The dreadful conditions in the UK and Europe earlier this year have badly dented sales.