Exits and sell-off for Kingfisher
The group continues to manage its turnaround
Castorama is part of Kingfisher's French DIY retail division, and considered a "problem" child" at the moment
Castorama is part of Kingfisher's French DIY retail division, and considered a "problem" child" at the moment
 
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Kingfisher still believes its transformation plan will boost profit by GBP500m over five years despite difficult external conditions
HNN Sources
European-based home improvement group, Kingfisher said it will be exiting some of its international business to better focus on its core UK, France, Poland and Romania markets.

Kingfisher's plan to pull out of its mostly loss-making operations in Russia, Spain and Portugal means stores will continue to trade while it seeks buyers. The process is expected to extend into 2019. Chief executive, Ve´ronique Laury, said:
We are operating in a difficult retail environment. We face challenges and we are addressing them.

Moving out of these markets would allow Kingfisher "to apply its strategy with more focus and efficiency in our main markets where we have, or can reach, a market leading position ... by making home improvement accessible for everyone," Ms Laury said.

The withdrawal from Russia has been interpreted as an admission of defeat for Kingfisher, which has ploughed millions of pounds into opening 20 Castorama stores in the country since 2006. The division made an GBP8 million loss last year despite increasing sales.

The group has 28 Brico Depoot branches in Spain, where it has traded since 2003, and three in Portugal, where it made about a GBP2 million loss, offsetting a GBP2 million profit in Spain.
Third quarter

Pressure is growing on Ms Laury after a disappointing third-quarter performance cast fresh doubt on her ambitious strategy to transform the home improvement group.

The group reported a lacklustre 1.3% fall in group like-for-like sales in the three months to the end of October, impacted mostly by a poor performance from its Castorama DIY chain in France.

The company said Castorama had been affected by IT disruption, product and pricing changes introduced as part of the turnaround as well as a weak market. It admitted that Castorama was the "problem child" of the business but said that it had an action plan that focuses on the perception that it was more expensive than rivals among French consumers.

But difficult trading and national demonstrations over a fuel tax in France that led to blocked roads have taken their toll on the business, and Kingfisher expects this to continue into the next year.

In the UK, B&Q's comparable sales were down 2.9%, but about 1.5 percentage points of this related to the ending of its loss-making kitchen and bathroom installation services. Screwfix, the builders merchant with a very strong e-commerce model, reported a 4.1% rise in like-for-like sales.
B&Q store divestment

In addition to exiting some of its international markets, Kingfisher is seeking to sell six B&Q stores. This is seen as an effort to raise cash to fund Ms Laury's turnaround plan, according to a report in The Times.

Kingfisher is understood to be attempting to raise GBP125 million by selling and leasing back B&Q stores in Birmingham, Croydon, Southampton and Cardiff, plus two in the northeast of England.

It will sell the B&Q stores in a subdued market. The shift of retail sales to the internet and persistent uncertainty over Brexit have dampened investor demand for physical retail assets. The company values its property portfolio at GBP3.5 billion.
Ongoing transformation

The group is halfway through Ms Laury's One Kingfisher five-year transformation program, which includes simplifying and unifying its ranges across brands, seeking savings and aims to deliver an additional GBP500 million of profit a year by 2021. It also involves boosting e-commerce, lowering prices and launching a new marketing campaign. Ms Laury said:
We have accelerated our move to an everyday low price strategy and have launched a new marketing campaign to make it visible to our customers, however there is no quick fix.

Kingfisher's plan for the group is costing GBP800 million over the five years.

While Ms Laury and Kingfisher insist the plan is on track, in September the group reported a 30.1% drop in pre-tax profit to GBP281 million for the six months to the end of July. It also announced then that Arja Taaveniku, the chief offer and supply chain officer, who was appointed three years ago to operate at the heart of the group's restructuring, was being replaced. Karen Witts, its highly regarded chief financial officer, will also be leaving next year to join Compass, the catering company.

However Kingfisher pointed out that it had hit all the milestones planned for the third year of the program. It also increased its gross margin in the third quarter, reversing a fall in the first half. The group has also met its aim to return GBP600 million to shareholders through buybacks in the first three years of the plan. Ms Laury said:
Transformation on this scale is tough, and we are operating in a difficult retail environment. We face challenges and we are addressing them.

"We have set out a plan that we always said would be back-end loaded," she added, who argued that the revamp is taking time because it goes much deeper than other business transformation programmes.
Many others are just scratching the surface, adding more cost on top of their existing costs.
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