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SOME say Véronique Laury’s “One Kingfisher” plan, which was supposed to boost profits by £500 million within five years, was doomed from the start. Whether they were right or wrong, the pandemic threw a spanner in the works - yet at one point also looked to have unexpectedly kick-started the sort of recovery that the five-year plan was failing to deliver.
A pandemic certainly wasn’t in Kingfisher’s turnaround plans, but the endless months of lockdowns and ‘stay home’ messaging proved to be a boon for the group.
Having been struggling to fix its flagging business for so long, it emerged as a potential pandemic makeover success story. Sales bounced back in the British, Irish and French markets, giving a £100 million boost to adjusted pre-tax profits in the year to the end of January and prompting a hike in pre-tax profit guidance for the first half of this year.
But that is, of course, still far shy of the £500 million in The Plan. So new boss Thierry Garnier wasted no time in bringing in a new strategy, largely scrapping the cross-company ranges that had lagged as different countries’ differing tastes showed one size really didn’t fit all.
Those increased profits also hang, to a large extent, on sales continuing at lockdown levels. But now that even diehard DIYers have a variety of other pursuits open to them, stock has already begun to pile up, with like-for-like sales on a two-year basis having already started to slow.
Throw in supply chain problems, cost inflation when it comes to wages and raw materials and it is evident that this particular project is far from nearing completion.
Crucially, online sales, which rose by 164% in the first half of last year have now slipped back. They are almost double pre-pandemic levels of 8%, but Kingfisher clearly needs to up its presence online if it is to compete head-on with other retailers.
The DIY sector has lagged when it comes to investment in ecommerce platforms and delivery modes, so Kingfisher is not alone here, but if Mr Garnier’s “Powered by Kingfisher” slogan is a keeper then this is one key area where work needs to be done.
Others are putting in the groundwork here and it’s paying off. Fellow DIY retailer Wickes said it expects adjusted pre-tax profits this year to come in towards the upper end of analysts’ expectations. Its half-year results showed adjusted pre-tax profits were 221% higher year-on-year at £46.5 million on the back of expansion of its digital business.
Trading around the 360p level, Kingfisher’s share price is an improvement on pre-pandemic levels, but half-year results due out on Tuesday will be closely watched for signs of any cracks appearing in the medium-term outlook.
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