As a general rule of thumb the more buzzwords a company uses when unveiling a new plan or update, the more uncertain its fortunes are likely to be. Kingfisher’s five-year ‘One Kingfisher’ plan is a prime example of this. It’s targeting a £500m increase in sustainable profit in five years time and aims to return £600m of capital to shareholders over the next three years through a share buy-back scheme.
The transformation of Europe’s largest home improvement retailer will apparently consist of ‘three strategic pillars’ including creating a ‘unified, unique and leading offer based on customer needs’, ‘driving our digital capability’ and ‘optimising our operational efficiency’. The plan will involve unifying sourcing and operations, while the online arm of the business will get a boost, but details in the announcement were a bit thin on the ground.
So far, shareholders have seemed as impressed with Kingfisher's jargon as MT is – shares were down 4% this morning, even with that £600m carrot dangled in front of them.
Analysts at Davy Research said, ‘A particular concern we have is that Kingfisher is attempting to achieve this transformation at a time when its end-markets are likely to remain quite challenging’, despite the plans seeming ‘ambitious but transformational if achieved’. Not quite the reaction Kingfisher would hope for, considering shares in the firm have fallen 6% over the past six months.
Chief exec Veronique Laury started laying the groundwork for this attempted turnaround last year, after streamlining the leadership and closing a sixth of B&Q’s 360 stores. Now its competitor Homebase, which was recently bought by Australian conglomerate Wesfarmers, is getting a rebrand to align it with Australian hardware chain Bunnings. It has a solid reputation Down Under for customer service and low prices, and Laury will be all too aware of the challenges ahead. Kingfisher’s biggest rival getting a fresh lick of paint isn't its biggest problem either.
The DIY culture in Britain has slowly but surely taken a hammering, as both Home Retail Group boss John Walden and Travis Perkins’ chief exec John Carter have warned. Walden claims it's a case of people having ‘less time and less skill’ to do DIY, meaning they’re ‘more likely to look to a third party for help’.
Carter meanwhile, suggested Britain has benefited from Eastern European immigration which has made home improvements cheaper, but has also fostered a ‘do it for me’ culture rather than ‘do it yourself’.
In an interview with the Telegraph, he said, ‘It was driven by the influx of Eastern European builders who were skilled and competent. They regulated prices and gave people a choice. The UK fell out of love with DIY from the peak when Changing Rooms and Ground Force were on TV.’
With all that in mind, Kingfisher’s plan is fairly brave. It estimates the rollout will cost £800m and hit profits in the first year by around £50m and £70-100m in the second year. But considering it’s facing falling sales sand declining profitability at its B&Q stores in the UK and its operations in France, the firm had to unveil something substantial. If Laury manages to pull it off, it’d be a makeover that puts Laurence Llewelyn-Bowen’s efforts to shame.