B&Q owner Kingfisher targets £500 million profit in battle for DIY spend

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Britain’s DIY market is set for an expansion war as B&Q’s parent Kingfisher revealed a major investment plan just weeks after Homebase’s new owners promised to put £500 million into the business.

Kingfisher, which also owns French chains Castorama and Brico Dépôt, promised to improve profits by £500 million every year, according to its boss Véronique Laury.

But Laury said the target would not be hit for at least five years and would cost £800 million through cost cutting, better sourcing, a major expansion of Screwfix Direct and an improved website.

Investors appeared nervous at the news, with the shares dropping 3.4% to 333.4p, as Laury added the investment needed would see profits fall by around £50 million this year and £70 million to £100 million in the second year.

She said: “Following an in-depth review of Kingfisher’s business last year alongside in-depth studies of our customers’ home-improvement needs, the leadership team announced the ‘ONE’ Kingfisher plan.

“This plan will leverage the scale of the business by becoming a single, unified company where those customer needs always come first. 

“We are excited to now reveal our new strategy and focus over the next five years based on the key pillars of creating a unified, unique and leading home-improvement offer, driving our digital capability and optimising our operational efficiency.”

The plan comes after Home Retail Group sold rival Homebase for £340 million to Wesfarmers. The business will be transformed with a £500 million investment and renamed Bunnings.

veronique-laury.jpg

Analysts were cautiously positive on the news from Kingfisher. Bernstein retail analyst Jamie Merriman said: “Overall, we think this is an encouraging statement of the opportunity to improve profit at Kingfisher… [but] There is nothing…  that addresses headcount and organisational restructuring.”

Kingfisher added that it would return £600 million to investors through a share buyback scheme.

Source Article from http://www.standard.co.uk/business/bq-owner-kingfisher-targets-500-million-profit-in-battle-for-diy-spend-a3164276.html

January 26, 2016 |
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