Kingfisher's suppliers told 'cut costs or else'

Kingfisher has issued an ultimatum to its top suppliers, calling on them to work with the company to cut costs or risk losing its business.

The retailer's objectives were spelt out at a summit meeting - the first of its kind for Kingfisher - held in London earlier this month.

Chief executive Gerry Murphy said: 'The message (to suppliers) is quite simple. If you want to work with us, there are massive opportunities.

If you don't, there won't be.'

Murphy wants to see an initial price reduction of 4 to 5 per cent on products to 'get the ball rolling'. The reductions are expected to help bring down prices in-store and push up the retailer's profitability.

Suppliers will be placed in one of three categories: disadvantaged, parity or advantaged. The latter will be favoured by Kingfisher, and expected to work with the group to invest and innovate, while also reducing costs.

The drive will begin with adhesives and sealants, paint, hard flooring and power tools.

Murphy likened the approach to that of Wal-Mart. Kingfisher has 8,000 suppliers, but plans to reduce the number of key suppliers to 1,000, from which it will source 80 per cent of product.

Kingfisher, which runs DIY giants B&Q and Castorama, posted interims on Wednesday. For the six months to August 2, group sales - not including the recently demerged electricals division - rose by 15.3 per cent to£3.9 billion before currency fluctuations.

Pre-tax profit increased by 24 per cent to£309 million, before demerger costs and a one-off French tax charge of£98 million.