Kingfisher tries to arrest dive with ambitious £60m e-commerce foray

Kingfisher unveiled an ambitious expansion strategy yesterday which will see the Woolworths and B&Q retailer invest an additional £60m in its e-commerce business and open 160 new stores this year.

Kingfisher, whose shares have fallen sharply after fears of margin pressure emerged in January, plans to develop a new internet division called e-Kingfisher. It will be split into five parts, covering the group's major market sectors such as DIY, electricals and health and beauty.

The division will have a separate management team with a chief executive who will sit on the main Kingfisher board. The division will also invest in new e-commerce ventures.

Sir Geoff Mulcahy, Kingfisher's chief executive, admitted that the internet division could be spun off as a separate entity but said the main focus was to encourage the division to think creatively without the baggage of a store portfolio to worry about.

"It could open up the possibility of a separate flotation if that fitted with the overall strategy," he said.

Sir Geoff said Kingfisher had been investing in its home delivery systems and would be able to offer a third-party service to other retailers including the dot.com fraternity. "As e-commerce moves towards volume sales, Kingfisher's scale, sourcing capability and brand strength become relevant and a major advantage providing us with a unique opportunity for rapid and substantial new growth," Sir Geoff said.

As part of its e-commerce plans Kingfisher said it has taken a minority stake in ThinkNatural.com, a health and beauty internet site. This follows Kingfisher's investment in LibertySurf, the French internet service provider which was floated earlier this month.

Kingfisher plans to provide a fuller update on its e-commerce strategy in late May.

The comments came as Kingfisher unveiled a 25 per cent increase in full-year profits to £734m, boosted by a full year's contribution from the Castorama DIY stores in France. Like-for-like sales rose by 5.1 per cent across the group.

Profits at Woolworths were flat after a £16m fall in profits from the entertainment division. This was attributed to one-off promotions in music and video as competition in the market increased. But the Comet electricals business did well, increasing profits by 15 per cent to £38m helped by strong sales of mobile phones and digital products.

Sir Geoff denied he was still on the look-out for a supermarket deal after last year's 's failed merger plans with Asda. "Asda was a unique opportunity in the UK because of the size of its stores. We do want to play a part in the consolidation of European retailing but we have options. We are not dependent on one particular deal."

Sir Geoff declined to elaborate on rumoured interest in the German Metro group. But analysts said they expect a European deal before long. "They need an electricals deal in Germany because they are only ranked about fourth there," said Rod Whitehaed, retail analyst at Deutsche Bank. "They probably need a deal in the German DIY market too."

Sir Geoff said the fledgling Big W format, which combines the Woolworths and Superdrug ranges with a food offer, could be exported to continental Europe.

Kingfisher shares rose 10 per cent to 534p.

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