Kingfisher Share News (KGF)

The day after its acquisition of French chain Mr Bricolage collapsed like a ill-fitted shelf, do-it-yourself group Kingfisher said it would close 60 stores as new chief executive Véronique Laury announced full year results and set out her plans for a "very different" company.The company, which also owns the Castorama chain in France and the Screwfix chain mostly in UK, also announced a £200m capital return during for the coming financial year, which was said to reflect directors' confidence in the company's medium term prospects, and .Taking some of the shine off her big reveal, Laury was forced to announce a deceleration in performance and confirmed recent rumours that B&Q's UK and Ireland chief, Kevin O'Byrne, was stepping down.In the year ending January 31, sales shrank 1.4% to £10.97bn and adjusted pre-tax profit fell 7.5% to £675m, slightly behind consensus forecasts, due to a slower French market in the second half of the year, foreign exchange headwinds and some exceptional costs.Earnings per share slipped 8.3% to 20.9p but the full year dividend was hoisted 1% to 10p. Net cash stood at £329m.Laury, who was appointed in December, said he new strategy was called ONE Kingfisher and was built around a better use of central resources, buying power and management in order to tap into what remained a "great market" for DIY.She said: "Home improvement is a great market with huge potential and Kingfisher has a strong position within it with further scope to grow in a sustainable way. However, it is clear to me that we need to organise ourselves very differently to unlock our potential."The main element will be to change the group's structure as "a locally managed set of businesses" and instead create a "single, unified company". She noting, for instance, that currently the group has few shared processes or infrastructure, no standardised operating model, a fragmented supplier base and relatively untapped economies of scale from its £7.4bn buying operations.Laury said her next step would be the creation of a new, international leadership team "with more focused cross-company roles", accompanied by some "sharp" decisions, cutting 15% of the "surplus" stores in the UK plus a few loss-making stores in Europe, as well as developing a unified garden and bathroom business and the start of a "Big Box revitalisation programme" across Europe.The store closures will incur £350m exceptional charges, but no cash costs. Industry experts said circa 3,000 jobs would be at risk with the 60 B&Q store closures. Management indicated that the closure plan will have a broadly neutral profit impact assuming that on average up to a third of sales transfer.Other plans are to cut the existing product tail from the bloated range of 393,000 products sold across the company, of which only 7,000 products are currently sold in at least two operating companies.Guidance for capex was for £350-400m, slightly below consensus expectations.Analysts and market impressedAlthough the decline in profits has gathered momentum, analysts were impressed with Laury's plans and so was the market, with the shares up 4.4% by 10:30.Brewin Dolphin's Nicla Di Palma said the new strategy makes sense, with the new focus on capital discipline and costs spelling good news for margin expansion."In the UK, Kingfisher over expanded in the late Nineties and early 2000s and now finds itself with too many stores and very long leases. Exiting now means better industry structure and pricing power. We also think unifying the offer across countries makes sense: consumers want similar things in different countries."Di Palma also was happy with the collapse of the Mr Bricolage deal as, although management stated that it is "considering all options", she believes the decision shows further capital discipline and also saves important management time.Alex Joyner at Galvan Research said the collapse of the Bricolage deal "still leaves a big hole in Europe" and Laury will "need to find new ways to generate growth on the continent".However he said her vision for 'ONE Kingfisher' is encouraging and hailed the stores closures as a bold move.Investec analysts highlighted how previous management teams have failed to capitalise on the opportunity for economies of scale from buying. "What's different is that Kingfisher has started a four-year IT infrastructure upgrade programme to give it modern IT systems and a single view of stock. Thus, any benefits are likely to be back-ended."