B&Q owner unveils major new strategy in DIY wars

Kingfisher, owner of the B&Q chain, has unveiled plans to boost annual profits by £500 million over five years just weeks after rival Homebase's new Australian owner promised to invest £500m into the business.

B&Q owner Kingfisher is seeking to boost profits. Picture: Lisa Ferguson

However, investors appeared a bit apprehensive about the latest plan announced at a capital markets day with fund managers and analysts yesterday, as Kingfisher chief executive Veronique Laury said the target would cost £800m through cost cutting, better sourcing, a big expansion of its Screwfix Direct business and an improved website.

Laury also said that the investment needed would see Kingfisher’s profits fall by about £50m this year and between £70m and £100m in the second year.

But she added that the strategy would also help Kingfisher return £600m to shareholders within three years through a share buyback.

The announcement comes in the wake of a shake-up in the DIY sector after Homebase was taken over by Wesfarmers in a £340m deal earlier this month.

Laury said the new strategy would focus on “three key pillars of creating a unified, unique and leading home improvement offer, driving our digital capability and optimising our operational efficiency”.

She added that Kingfisher acknowledged “the challenges ahead”, but that the opportunities offered by successful implementation of the strategy were significant.

Laury announced cost cuts last March, including shutting 60 stores in two years and 3,000 redundancies in the UK and Ireland. Kingfisher notched up like-for-like sales growth of 2.4 per cent at its DIY chain in the quarter to end-October. Its Screwfix arm saw store sales lift 13.3 per cent thanks to strong growth in the housing market.

But Kingfisher’s French business – where it trades as Castorama and Brico Depot – continued to struggle, as weak consumer confidence and declines in the housing and construction markets saw sales edge just 0.1 per cent higher.

Analyst Kate Calvert at Investec said the returns for shareholders in the plan were “insufficient for the execution risk”.

Calvert added that there was “no guarantee that all the costs will fall out and the profits come through”.