Brain Food: Behind the spin - B & Q

THE DILEMMA

by
Last Updated: 31 Aug 2010

The Sixties were swinging when Richard Block and David Quayle, two Southampton entrepreneurs, set up shop in their home town. Did they imagine that 50 years later, B&Q outlets would be catering to keen DIYers from Chingford to China? That the chain, now owned by Kingfisher plc, is suffering a decline in the UK comes as a surprise - after all, DIY is as much a part of British life as warm beer and OK! magazine. Although B&Q remains market leader in the UK, financial results for 2005-06 were awful: a 52% fall in profits and like-for-like sales down 8%, despite the success of overseas ventures. B&Q's health is important to Kingfisher, as it accounts for 75% of invested capital.

THE SPIN

'Yes, B&Q has had a deeply rubbish year,' the chain's CEO Ian Cheshire told the Mail on Sunday, 'but this is just the most fantastic business starting-point to have. Maybe it's because it is so huge and has been so successful for so many years that if it runs into any problems, there is an instant assumption that, as in Hamlet, there's something rotten in the state of Denmark, and everything is catastrophic.' Gerry Murphy, CEO of Kingfisher and Cheshire's boss, blamed the worst market conditions in 10 years for the chain's underperformance, but insisted: 'We've never said we are the victim of the market, that we have been supine.'

THE STRAIGHT TALK

Falling sales, rising costs and price-cuts have taken their toll on a chain that critics say has failed to keep up with the home market. To effect a turnround, B&Q needs to attract more and different customers - ie, women. It has already started a stores revamp to include Ikea-style room displays and is toying with the idea of offering a fitting service, staffed by Polish builders, for nestmakers who leave the DIY to others. More aspirational upmarket products will mark a shift away from B&Q's commitment to everyday low pricing.

THE VERDICT

B&Q announced measures to halt its UK decline last September, including 400 redundancies and the closure of 17 stores, but was that a case of too little, too late? Paul Mumford of Cavendish Asset Management told the FT in March: 'They should have seen it was not so good earlier. Had market conditions been better, more people would have been calling for heads to roll.' Fingers crossed for Murphy that the two May bank holidays will produce a stampede of customers, otherwise, as in a Shakespearean tragedy, an untimely death could occur ...

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Marketing

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