Last checked at 
* Q1 operating profit up 20 pct to 142 mln stg
* UK sales weaker than hoped
* France weighed down by weak market (Writes through, adds details)
By Neil Maidment
LONDON, May 29 (Reuters) - Shares in Kingfisher,Europe's biggest home improvements retailer, fell 6 percent onThursday as pressure on profit margins and a smaller thanexpected sales boost from warmer weather pushed first-quarterearnings below forecasts.
The owner of B&Q in Britain and Castorama and Brico Depot inFrance said underlying operating profit for the 13 weeks to May3 grew 20 percent to 142 million pounds ($237 million). Resultsa year ago were depressed by bad weather across much of Europe.
The gain was slightly less than a market consensus forecastof 145 million pounds. Analysts were unimpressed by a 2percentage point fall in Kingfisher's UK gross profit margin,which it blamed on higher sales of less profitable outdoorproducts, rising home delivery costs and promotions.
Concerns over the UK margin, lower than expected group salesgrowth of 6.1 percent and the impact of weak consumer confidencein France combined to send Kingfisher shares down 6 percent to392.5 pence by 0922 GMT.
"The group like-for-like sales increase was 'only 6percent', rather than the hoped for 7 to 8 percent, with B&Q inthe UK just under 10 percent like-for-like, which ought to havebeen better, given very weak comparatives and the betterweather/late Easter impact," retail analyst Nick Bubb said.
While not as high as hoped, underlying sales grew 10.1percent in the UK and Ireland. Sales at trade-focused Screwfixwere strong and were up 9.7 percent at B&Q, its best performancein a decade, as sales of barbecues shot up 42 percent andconsumers spent on improving their gardens.
"The 200 basis points of gross margin decline is likely inour view to have been focused in B&Q where the company continuesto be indecisive between low prices and promotional pricing,"analysts at Espirito Santo said, confirming their 'sell' rating.
Kingfisher's profits outpaced sales growth because its lowvariable costs meant more of the additional sales fed through toits bottom line.
The group's Chief Executive Ian Cheshire called thefirst-quarter performance a strong start to the year but warnedthat sales growth in its second quarter would be much tougher asit comes up against strong year-earlier figures.
He said the UK gross margin movement was purely down to theseasonal mix of its products and "nothing to get worried about".
CASH RETURN
In France, where Kingfisher makes half of its profits,like-for-like sales growth came in below expectations at 1.6percent, with better weather only easing the impact of softunderlying markets caused by continued weak consumer confidence.
The company said exclusive talks to acquire smaller Frenchrival Mr Bricolage, announced in April, wereongoing.
The group, which has 1,134 stores in nine countries, saidunderlying sales rose 6.8 percent in its international division,driven by Poland and Russia. But performance in China was weakerthan expected due to a fall in new property transactions.
The results overshadowed Kingfisher's announcement that itwould pay a 100 million-pound special dividend as part of itsplans to give shareholders extra rewards, starting with 200million pounds this fiscal year.
Kingfisher said it would pay a special dividend of 4.2 penceper share on July 25. The company, which in March outlined plansfor a multi-year programme of cash returns, has already returned35 million pounds via a share buyback.
($1 = 0.5986 British Pounds) (Additional reporting by Kate Holton; editing by Tom Pfeiffer)
