Ailing B&Q asks managers to DIY

Last quarter was a washout for B&Q - can its new private equity-style incentive scheme stop the rot?

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Last Updated: 06 Nov 2012

Kingfisher, the owner of B&Q, said today that the group suffered an 8% slide in like-for-like sales in its first quarter – thanks largely to a dismal showing in the UK. Apparently the group (which also includes Screwfix and Trade Depot) saw sales of outdoor equipment plummet thanks to the wretched weather and the earliest Easter for almost a century. Somehow it seems a bit pointless splashing out on a new barbecue when we spend our weekends stuck indoors watching the rain…

New B&Q boss Ian Cheshire clearly faces a mammoth task as he begins a four-year turnaround plan to try and revive sales, particularly with the UK in the middle of an economic slowdown. Although the bad weather gave a slight boost to sales of interior decorating products, B&Q has been hit hard by our reluctance to spend on big DIY jobs and expensive house purchases as the credit crunch has started to bite. Since his turnaround plan relies heavily on improving profitability in the UK, he must be feeling a little nervous.

On the other hand, there was some good news today. Although B&Q had a shocker in the UK, booming sales in Eastern Europe helped boost overall profits by 9% to £96m – testament to the benefit of having an international business, said Cheshire. Driving sales in some of its international outposts (particularly Russia, Poland and Turkey) is also a big plank of the turnaround plan – although it will have to do a better job that it did in China. B&Q has struggled there in recent years, and today Cheshire announced a programme of store closures in a bid to reverse the decline.

One way in which Cheshire hopes to make all this happen is by extending his own private equity-style incentives to the rest of the B&Q top brass, in a bid to make them pull their socks up. He’s set to pocket £16m in four years’ time if the group hits various demanding targets (and since these include creating an extra £3.5bn of shareholder value, there probably won’t be too many complaints if he gets it). Earlier this week, it emerged that 50 top executives are being put on a similar scheme – if all goes well, they could stand to share tens of millions; if it doesn’t (to quote Anne Robinson), they leave with nothing.

We get the whole ‘alignment of interests’ argument, but we can’t help wondering if it will have the desired effect. After all, if they’d be on this scheme already, would they have been able to prevent the unseasonal rainfall and the early Easter? Perhaps they’ll be praying to the weather gods and putting in a call to the Computus experts even as we speak...

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