Kingfisher will shutter 60 B&Q stores as part of new boss Véronique Laury’s plans to turn the business around. This is what the analysts had to say about her strategy.

Kingfisher will shutter 60 B&Q stores as part of new boss Véronique Laury’s plans to turn the business around. This is what the analysts had to say about her strategy.

“The main point to come out of this morning’s conference call in our opinion is the possibility that Kingfisher moves its UK DIY operations onto the Castorama facia. While this was not explicitly said, chief executive Veronique Laury would not confirm that B&Q would still be a trading format in the medium term.

“The other takeaway for us was that SKU reduction is a misleading notion here. While in broad terms the group aims to reduce SKUs from 400,000 to 200,000, its main Big Box trading format going forward will clearly be the large Castorama format, which operates with around 55,000 SKUs and a commitment to full availability.

“This is not a criticism – we believe that Castorama Big Box is a very credible trading format and more focused on selling product than B&Q, which seems to us over time to be more focused on the back-end/logistics/buying side of the operation to maximise returns whatever the sales. But the consequence of moving the group’s Big Box estate to that model is in our view likely to be working (inventory) and fixed (refit) capital intensive – somewhat at variance with the impression given of SKU reduction.

“If B&Q were to be terminated as a group format this would have far reaching consequences operationally and financially. Clearly running the UK operation in the same way and with the same range as the French one would theoretically simplify the combined operation and allow consolidation of support functions.” Tony Shiret, BESI Research

 

“Final results were slightly below our and the markets expectations.

“FY15 consensus forecasts have been reduced by almost 20% over the last year and it is disappointing that the Mr Bricolage acquisition has fallen through. The acquisition would have strengthened the company’s position in the French DIY market and would have been accretive to earnings. However, the company has a relatively strong balance sheet, following the disposal of its holding in Hornbach and its 70% stake in its loss making Chinese business. This should enable it to buy back shares, accelerate dividend growth over the next three years and restructure the UK property portfolio.” Mike Dennis, Cantor

 

“Compared to our expectations the UK delivered a small beat offsetting a small miss in other international, whilst France was in line.

“The new CEO has today outlined her plans for the business under the “ONE” Kingfisher initiative, which will see a greater emphasis on standardising the offer across the Group’s formats under a unified management structure. The common sourcing initiative (circa 22% of sales) is likely to accelerate again having stalled somewhat in recent years. The major new news contained within the update today is the planned closure of 15% of B&Q’s trading space (60 stores) as they look to tackle excess space in the UK. There will be an exceptional cost of £350m taken over the next two years associated with the planned closures. Management indicate that this closure plan will have a broadly neutral profit impact assuming that on average up to a third of sales transfer.” Mark Photiades,  Canaccord Genuity