LONDON, July 22 (Reuters) – Kingfisher (KGF.L), Europe’s biggest home improvements retailer, said it was on track to meet first-half profit expectations, with cost cutting and business improvement measures offsetting a dip in underlying sales.

The firm, which runs market leader B&Q in Britain as well as the Castorama and Brico Depot chains in France and elsewhere, said on Thursday sales at stores open at least a year fell 0.8 percent in the 10 weeks to July 10, its fiscal second quarter.

That compared with analysts’ forecasts for a broadly flat outcome and follows a 1.8 percent drop in the first quarter.

Underlying sales in Britain fell 4.4 percent, hit by a drop in demand for kitchen, bathroom, bedroom and building products as cautious consumers shy away from large purchases.

But that was partly offset by a 2.6 percent rise in underlying sales in France and a 0.8 percent increase in other international markets, which include Poland and China.

Kingfisher, which runs over 830 stores in eight countries, also said gross profit margins rose in both Britain and France, lifted by cost cutting and moves to buy more products centrally, and directly, from cheap manufacturing centres like Asia.

“While we remain cautious about the outlook for consumer spending, we are confident that the strengths of the group and our well established self-help initiatives leave us well-placed to continue our good progress over the balance of the year,” Chief Executive Ian Cheshire said.

Kingfisher shares have lagged the STOXX 600 European retail index .SXRP 4 percent this year. They closed at 223.5 pence on Wednesday, valuing the firm at 5.2 billion pounds ($8 billion). (Reporting by Mark Potter; Editing by James Davey