- Kingfisher to add £500m to bottom line in the next five years
- The retailer has upped capital expenditure to £800m over the next five years and profits will be hit over the next two years.
- Transformation focused on three pillars: creating a unified, unique and leading offer, driving digital capability and optimising its operational efficiency
DIY group Kingfisher will unveil plans to investors today on how it will add £500m a year to its bottom line in five years’ time.
Kingfisher, which launched the ‘ONE’ Kingfisher plan to leverage the scale of the global DIY business by becoming a “single, unified company”, will invest £800m over the next five years.
The retailer, which operates B&Q and Screwfix in the UK, expects pre-exceptional reported profit to be impacted in the short term. Net of operational efficiencies, it expects profits to drop about £50m in the first year and between £70m and £100m in year two.
Kingfisher chief executive Véronique Laury will also reveal the company will return £600m to investors over the next three years, in addition to its annual dividend, in its capital markets day this morning.
Laury said: “We are excited to now reveal our new strategy and our focus over the next five years based on the three key pillars of creating a unified, unique and leading home improvement offer, driving our digital capability and optimising our operational efficiency.
“With a clear roadmap now in place alongside clear long-term targets, the size of the five-year opportunity is significant.”
Laury said the transformation is “over and above ‘business as usual’”. It expects pre-transformation performance to be in line with the macroeconomic backdrop and has planned limited expansion, the focus of which will be its Screwfix fascia.
Three strategic pillars
Kingfisher’s transformation is based in three strategic pillars
1. Creating a unified, unique leading offer
The retailer expects to generate the bulk of its additional profit by unifying its product worldwide. It expects this to add £350m to the bottom line by the end of year five. It will invest £480m in the project.
Kingfisher chief financial officer Karen Witts said there was a big opportunity as its global customers were “more similar than different”.
Kingfisher expects a 5% reduction in the costs of goods through the initiative. It has already introduced its first wave of unified essential items and has achieved “very encouraging results”
2. Driving its digital capacity
The retailer expects to add £50m to its bottom line by the end of its five year plan by improving its website. Laury said it would bring sites across the group up Screwfix’s standard, which she said was “best in class”. It will invest £210m in digital across the five years.
It has also hired former Amazon director Rakhi Parekh to its board, which Laury said “shows our move towards a real digital business”.
Laury said the business is building the capability to “unlock more of our customers’ complex home improvement journey”.
Over the five years, ecommerce is expected to grow from 2% to 6% to 7% of Kingfisher’s sales, said Witt.
3. Optimising operational efficiency
Kingfisher will invest £110m into gaining operational efficiencies, which will benefit the bottom line to the tune of £100m by the end of its fifth year of transformation