Kingfisher’s top and bottom lines have been trapped in a downward spiral since kicking off its One Kingfisher transformation plan three years ago. 

The DIY giant’s wide-ranging strategy was initiated by outgoing boss Véronique Laury in 2016 with a focus on three main pillars: unifying product ranges across its businesses – including B&Q, Screwfix, Castorama and Brico Depot – driving its digital capabilities and bringing in a unified IT platform to create operational efficiencies. Laury’s bold aim was to deliver £500m of incremental profit by 2021/22. 

Earlier this year, that profit target was scrapped – and now the One Kingfisher plan itself could also be ripped up by incoming chief executive and former Carrefour Asia boss, Thierry Garnier.

After Kingfisher suffered a 12.5% decline in statutory pre-tax profit to £245m in the six months to July 31, under-pressure chair Andy Cosslett opened the door for the first time to the prospect of a strategic reset, admitting that Garnier would have the “opportunity to review everything that’s going on with the business”.

Those words represented a sizeable U-turn from Cosslett, just six months after he claimed the group was “wedded” to Laury’s strategy and that her successor would be charged with executing her existing plan.

Indeed, Kingfisher’s hefty 49-page interim results document contained just two mentions of ‘One Kingfisher’ – and the page previously dedicated to the blueprint on the retailer’s own investor website appears to have been renamed: ‘Our Transformation’. 

“Thierry arrives with no handcuffs,” Cosslett says. “We’ve asked him to come and use his knowledge and experience in global understanding around the business to look at everything.

“He’s come to make a difference and it’s for him to engage the board as to where he thinks a difference can be most felt. Right now, we need to make the most of the assets we have. I’m ruling nothing in or out at this stage.”

With a strategic reset and a break up of the DIY conglomerate both on the table as options for Garnier, will he be able to rebuild Kingfisher? 

Break-up

The B&Q owner has already shuttered its Screwfix stores in Germany and is in the process – albeit a difficult one – of offloading its businesses in Russia, Portugal and Spain. Cosslett’s statements fuelled speculation that such disposals could prove to be the start of a wider sell off. 

But Investec analyst Kate Calvert believes untangling Kingfisher’s businesses would be problematic, having spent the previous three years knitting their ranges and IT platforms together. 

“You’ve spent all your time banging these businesses together in terms of supply chain and distribution that breaking it apart would not be great,” she suggests.

But even if Garnier did attempt to break up the group, would there be any trade or private equity appetite to buy any of its fascias?

Travis Perkins has already revealed plans to spin off Wickes, which is likely to fall into the hands of its existing shareholders with potential buyers hardly queuing out the door to make an offer.

Screwfix, which grew sales 9.9% during Kingfisher’s first half, represents the group’s best-performing and most attractive asset to potential buyers. But one industry source suggests Kingfisher would be reluctant to sell off the chain given its impressive growth trajectory.

“If they sold Screwfix they would just be making a vast competitor for B&Q, which would not be in their best interest,” the source says.

Another UK competitor is not what Kingfisher needs, particularly at a time when Wickes is bouncing back to form and Homebase is gradually recovering as it implements the CVA it launched last August.

Despite Cosslett admitting B&Q “lost a few” customers to such rivals, Kingfisher will likely be keen to retain ownership of the UK’s DIY market leader. That would leave its European markets as the area with “potential opportunity” for further sales, according to Calvert.

Kingfisher has plans to close 15 stores this year – nine of which are Castorama locations in France. 

“Kingfisher within France could be split – Castorama could go to someone and Brico Dépôt could go to someone,” Calvert suggests.

Too far gone?

Whether or not there are disposals, Garnier will be instantly faced with a huge strategic question: can he really rip up the One Kingfisher plan? Or, almost four years into a mammoth five-year project, is it simply too far down the track to scrap it and start afresh? 

Cosslett admits the business has “one foot in the past and one in the future on many of the things we are doing”. As a result, he says the group will “finish the implementation [of One Kingfisher] because we can’t just stop mid-way”.

One industry source believes Garnier’s hands could be tied slightly by that fact. “Thierry will review everything, but that doesn’t mean he will necessarily change everything,” he says. “When you’re three years into a five-year plan and committed to such huge change, it’s very difficult to rip that up and start again.”

With that in mind, Garnier may be left tinkering with the One Kingfisher strategy, rather than re-writing it. Whitman Howard analyst Tony Shiret suggests that should include an increased focus on its digital proposition, particularly in the French market.

Online sales rose 18% across the group in its first half, bolstered by a 24% uplift in click-and-collect. Ecommerce now accounts for 7% of group sales, compared to 3% before the One Kingfisher plan swung into action. 

But its digital progress has been slower in France, where total sales fell 4.2% to £2.2bn during the six month period, driven by 4.3% and 4.2% declines at Castorama and Brico Dépôt respectively.

Shiret says: “They’ve got a problem with digital and they’ve got to embrace it more fully, which will have implications for the physical store estate. 

“There will be more closures [in France]. That has got to be embraced. It’s not easy to do online well and they are starting so far behind. 

“Theoretically, with a big market share business, as long as you stay broadly in-line with the market and you can manage the cost base between online and physical, you should be able to grow with the market.

“But if you’re only exposed to physical, which is the bit that’s declining, then you’re always going to be battling with the sales line. They need to get up and running a lot quicker in digital than they’re looking to do now and that’s going to involve some difficult decisions.”

Calvert agrees Garnier will need to ramp up efforts to revitalise Kingfisher’s French businesses – and says fixing the culture should be his first step on that journey. She suggests that France still operates separately from the UK business, despite the drive under One Kingfisher to align them more closely.

“Ultimately the management is still trying to sort out France. Culturally [the UK and France] are very different businesses and it appears that they continue to operate as separate operating businesses.

“This whole idea of common working practices has not really been imposed on the business. He needs to decide if that is still the objective and get on and bang some heads together.”

People problem

That’s not the only people-related problem Garnier will face when he takes the reins next week – the Frenchman will be walking into a Kingfisher boardroom devoid of faces and DIY experience.

A mass exodus over the past two years has seen the likes of finance boss Karen Witts, supply chain director Arja Taaveniku, chief customer officer Pierre Woreczek, chief people officer Alastair Robertson and the most recent departure, chief trading officer John Colley, all head for the exit door.

Cosslett says Garnier is already “thinking about the structure of his top team” and expects to unveil “a steady flow of news about new appointments” in the coming weeks and months.

He will need to. Interim finance boss John Wartig and chief offer and sourcing officer Henri Solère are the only two remaining members of the executive team that hold group-wide responsibilities. 

One industry source says: “Kingfisher cannot lose any more people with DIY experience or it will fall to pieces. That business needs seasoned home improvement professionals if they are to turn it around.

“Look at what Damian [McGloughlin] is doing at Homebase. That business was in a hole, but he has gone in there, done a lot of sensible stuff from a trading and ranging perspective, and it’s working.

“Kingfisher can do the same, but it needs the right people to drive that.”

Whoever Garnier and Cosslett surround themselves with at the top table, investors should be braced for a few more years of pain. If Garnier is to get Kingfisher back on track, it will be one hell of a rebuilding job.