Kingfisher faces `clamour for change'

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The Independent Online
Top management changes at Kingfisher, the troubled high street retailer, were predicted in the City last night after the shares fell to their lowest for almost three years following a dramatic warning over this year's profits.

Kingfisher, whose store chain includes Woolworths, the DIY retailer B&Q and electrical chain Comet, said profits for this year would be unsatisfactory. One analyst said: "These figures are well below expectations and the management must be reeling. I'm expecting a clamour for change at the top."

Another added: "These [top management changes] are starting to be asked. The scales have fallen from the eyes on this company."

Nigel Whittaker, Kingfisher's corporate affairs director, shrugged off City criticism, saying: "We believe we are taking the right steps for the business in the long term. There is no gain without the pain."

Mr Whittaker declined to comment on whether the collapse in the share price in the past year might force changes at director level. "I don't anticipate any changes but I don't make those decisions."

The shares, which stood at 774p at the beginning of last year, fell a further 19p yesterday to close at 402p. Investors have seen nearly £2bn wiped off the value of the company in little more than 12 months.

Sir Geoff Mulcahy, Kingfisher's chairman, said that while good progress had been made at B&Q, the French electrical retailer Darty and at Superdrug, the performance at Comet and Woolworths had disappointed.

City analysts reduced their full-year profit forecasts from a previously expected £315m to around £280m after yesterday's trading statement. The downgradings come only days after other retailers such as Next and Tesco have reported healthy sales increases.

Woolworths and Comet were shown as the group's worst performers. At Woolworths, like-for-like sales edged up by 1.8 per cent for the 23 weeks to 7 January but the company said Christmas trading, which accounts for virtually all of Woolworth's profits, had been poor.

The company warned that profits from the 800-strong Woolworths chain would fall by a third from £75m to £50m this year. Woolworths introduced electronic point-of-sale systems during the year. This would help in the longer term but had proved disruptive, it said. Higher operating costs and a poor product mix had also affected performance.

Earlier in the financial year, chief executive Alan Smith said Woolworths had concentrated too much on promotions and special offers and had neglected its core range. Kingfisher says Woolworths is in the middle of a programme of change and will be rethinking its merchandise.

Industry observers said core areas of Woolworths' business had come under threat from specialist rivals. Its toy division has been squeezed by Argos and Toys R Us. Childrenswear has been under pressure from Mothercare, Adams and Marks & Spencer. The music division is up against WH Smith, which also owns the Our Price chain.

Comet has also fared badly. Like-for-like sales fell by more than 10 per cent on last year and the chain will now make a loss over the full year. Mr Whittaker blamed increased competition, particularly from the regional electricity boards. Comet, which stole a march on rivals by moving out of town, has also been joined by rivals Currys and Dixons, which has put pressure on Comet's market share.

DIY chain B&Q saw like-for-like sales rise by 1.8 per cent. The stores did not trade well in the first quarter but had been performing better since then, the company said. Darty, the French electrical retailer was the best performer in Kingfisher's portfolio, increasing sales by 3.4 per cent.

Kingfisher will also be forced to make provisions of £30-35m on the disposal of the Charlie Brown car parts and servicing garages. A further £100m provision may be needed for the re-positioning and refurbishment of some of the B&Q superstores.

Net debt by the year-end is expected to be £500m compared with the £380m analysts were expecting. Some City analysts feel the share price has now hit bottom but others feel there may be more bad news to follow. Nick Bubb, retail analyst at Morgan Stanley, said: "Why buy a loser when you can buy one of the Stanley, said: "Why buy a loser when you can buy one of the winners like Next or Storehouse."