Low-price strategy winning customers, says Kingfisher: All businesses 'making progress in attaining group's objectives'

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The Independent Online
KINGFISHER, the retail group which owns Woolworths and B&Q, yesterday tried to settle the City's jitters over its low-price strategy with a confident presentation of its results and trading prospects.

Sir Geoffrey Mulcahy, chairman, said the objective of the group's retailing strategy was to increase profits by attracting customers through a mixture of low prices and better service.

'All our businesses are making progress in attaining those objectives,' Sir Geoffrey said. 'I am convinced the strategy is right and is working.'

The market, however, was less convinced and Kingfisher's shares fell from 570p to 561p. They have dropped from 678p since the group issued a disappointing trading statement in January.

Sir Geoffrey's comments came as the group announced a 51 per cent rise in pre-tax profits to pounds 309.3m on sales up 26.3 per cent at pounds 4.5m for the year to 29 January.

But the advance was largely due to a pounds 79.2m contribution from Darty, the French electrical retailer it acquired last April. Operating profits from its four British chains fell by pounds 7m to pounds 204.4m.

Woolworths was affected by a slump in the demand for video games, which meant that prices had to be cut, and by over-optimism in its toy department after a strong first half.

These combined to push the chain's profits down from pounds 77.8m to pounds 74.5m despite a 6.9 per cent rise in sales to pounds 1.3m, while operating margins dipped from 6.3 to 5.7 per cent.

Sir Geoffrey said that other areas of the business, particularly children's wear and home equipment, were strong.

B&Q was the only business to report an increase in profits, from pounds 81.1m to pounds 82m, although again margins slipped from 7.7 to 7.1 per cent.

Sales at its 25 Depot stores - which are at least twice the size of standard B&Q stores and carry a wider range at lower prices - rose 14.6 per cent against the figure of 3.6 per cent achieved at the rest of the chain.

The group has, however, decided to rename the Depot chain Warehouse and will concentrate on openings of at least 100,000 square feet of extra space. Some of the 25 Depot stores will be converted to B&Q Superstores.

Darty's sales dropped 2.7 per cent, reflecting the slump in the French economy, although it maintained its market share.

Comet suffered from a decline in the demand for brown goods, such as television sets and hi-fi equipment, and its profits dropped from pounds 17.7m to pounds 16.4m. The contribution from property rose from pounds 8.1m to pounds 43m.

Earnings per share were 36.9p against the previous year's 32.2p, and the dividend is increased by 8.8 per cent to 14.9p by means of a 10.5p (9.5p) final.

(Photograph omitted)

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