Election clouds recovery - Kingfisher

"As we look to next year, we have to recognise, particularly around the UK, a level of uncertainty," Chief Executive Ian Cheshire told reporters, after the company beat forecasts with a 28 percent rise in third-quarter profit.

"This could go either way next year, either taxes and unemployment will hit, or potentially post an election budget there may be an end to uncertainty and people can start to focus on the positives," he said.

Kingfisher, which runs market leaders B&Q in Britain and Castorama in France, would focus on the self-help initiatives of cutting costs, revamping stores and improving its supply chain rather than count on a rebound in markets.

"We're well positioned if that happens but not relying on it," said Cheshire.

Despite its caution, Kingfisher's performance added to evidence that consumer spending is picking up after a brutal downturn in late 2008 and early 2009.

Retail bellwether John Lewis has forecast strong Christmas sales and reported department store sales up 22 percent in the week to November 28, while last week DSG International, Europe's second-biggest electrical goods retailer, reported a return to underlying sales growth in recent weeks.

But the evidence is far from conclusive, with a survey on Tuesday confirming an earlier rebound in house prices had slowed.

Kingfisher, with over 820 stores in eight countries, made retail profit of 227 million pounds in the 13 weeks to October 31.

That compared with analyst forecasts in a 204-225 million pound range, according to a Reuters poll, and was up from 176 million a year ago.

The firm also cut its net debt to 200 million pounds and forecast year-end net debt of 300 million pounds, much better than previous guidance.

"The progress from a net debt position of 1.6 billion pounds at January 08, to just 300 million pounds by January 10 is nothing short of miraculous," said Andrew Wade, analyst at Numis Securities.

He raised his year to end-January 2010 pretax profit forecast to 541 million pounds from 525 million.

Kingfisher shares have more than doubled over the last year on recovery hopes, outperforming the DJ Stoxx European retail index by 43 percent.

The stock was down 0.5 percent at 235 pence at 9:42 a.m., valuing the business at about 5.6 billion pounds.

Kingfisher's sales increased 5.6 percent to 2.69 billion pounds, with sales at stores open more than a year up 0.8 percent.

Like-for-like sales increased 5.7 percent at B&Q, but fell 0.8 percent at Castorama. They were up 1.0 percent in Poland and increased 4.7 percent in China, the first positive result for two years.

(Editing by Dan Lalor and Jon Loades-Carter)