B&Q owner Kingfisher has said it expects to see its tax bill increase by about £31 million next year due to plans unveiled in the Government’s Budget, as it narrowed its profit forecast for the year.
Shares in the company were down by more than 10% on Monday morning following the update to investors.
The DIY giant said consumer spending weakened as a result of uncertainty in the lead up to the autumn Budget statement in the UK.
It reported total group sales of £3.2 billion between August and October, 1.1% lower than the same period a year ago, when compared like-for-like.
In the UK and Ireland, sales edged up 0.4% to £1.6 billion.
Kingfisher said a stronger sales performance in August and September was offset by consumer uncertainty in the UK and France in October as people waited to see what tax measures would be announced in government budgets.
A higher rate of employer national insurance in the UK is set to push up its tax bill by about £31 million in the next financial year.
The planned increase to the national minimum wage will be offset by cost-cutting and improving productivity, Kingfisher also said.
The company said it was now expecting its adjusted pre-tax profit for the year to be between about £510 million and £540 million, down from a previous maximum of £550 million.
However, Kingfisher chief executive Thierry Garnier pointed to “early signs of improvement” of so-called big ticket purchases in recent months.
Sales of costlier items, such as kitchen and bathroom ranges and products for large home improvement projects, have been weaker for the retailer this year.
“We continued to see improved volume trends in our core categories, supported by repairs, maintenance and existing home renovation,” Mr Garnier said.
“As expected, sales of our ‘big-ticket’ categories remained soft, although we are seeing early signs of improvement.
“Looking towards next year, recent political and macroeconomic developments have layered incremental uncertainty onto the near-term outlook in our markets.
“As a group, we are strongly positioned to benefit from the inflection to come within home improvement.”
Consumers have tightened their belts amid uncertainties around policy changes from new governments in the UK and France
Russ Mould, investment director at AJ Bell
Russ Mould, investment director at AJ Bell, said: “Consumers have tightened their belts amid uncertainties around policy changes from new governments in the UK and France – two of its major operating regions. That’s caused a wobble to sales.
“A plan is in place to drive greater sales to trade customers, do more via e-commerce, and roll out more compact stores.
“This plan will only work if homeowners are ready and able to splash the cash on home improvement projects, supported by a strong economy which makes people feel secure in their jobs and happy to shell out money.”