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B&Q to downsize; Kingfisher shares a ‘buy’?

Kit Klarenberg
Written By:
Kit Klarenberg

Kingfisher plans to close 60 B&Q outlets, and replace the UK head of the DIY chain, as part of a major restructuring plan.

Yesterday, Kingfisher’s attempted buyout of French home improvement chain Mr. Bricolage collapsed after the chain’s board withdrew backing for the deal. Following confirmation that the bid had failed, Kingfisher chief executive Véronique Laury announced a major strategic update, which would entail a ‘very different’ approach, including the creation of a new, international leadership team with cross-company roles, and major cuts to B&Q’s operations both nationally and internationally, to be instituted in the next two years. B&Q currently has 360 stores in total, with several loss-making outlets dotted across Europe.

Laury has already demonstrated a readiness to cut unprofitable divisions; in December last year, the Chinese division of B&Q was sold for £140m to Wumei Holdings.

While close to 20 per cent of the chain’s stores will be closing under the plan, projected job losses are few; Kingfisher has pledged to redeploy the majority of staff from closing branches to surviving outlets. However, one confirmed loss is Kevin O’Byrne, B&Q’s chief executive in the UK and Ireland; he will step down on 15 May.

The overhaul follows the announcement of a 15.2 per cent fall in Kingfisher’s pre-tax profits (to £644m) last year. Total sales last year, however, increased by 2.9 per cent to £10.97bn; like-for-like sales at B&Q were up 1.4 per cent, the strongest sales showing in five years.

“Home improvement is a great market with huge potential and Kingfisher has a strong position within it with further scope to grow in a sustainable way,” said Laury. “However, it is clear to me that we need to organise ourselves very differently to unlock our potential.”

“This will involve taking what is essentially a locally managed set of businesses and creating instead a single, unified company where customer needs come first. The first step in developing this new organisation is the creation of a new, international leadership team with more focused cross-company roles.”

Markets reacted positively to Laury’s announcement, with shares rising 3.59 per cent (to £3.78) this morning. The failed takeover of Mr. Bricolage appears likewise to have had a positive impact on Kingfisher shares, with the price rising 2.5 per cent (to £3.67) in the wake of the news. Kingfisher shares had long been stuck on a downward trajectory, down 9.2 per cent over one year, but may now be in a position to claw some of those losses back.