Kingfisher enters DIY expansion war with £500m turnaround plan

Investors appeared unconvinced by the news

B&Q's owner, Kingfisher, is set on major expansion (Getty)

Britain’s DIY market is set for an expansion war after the parent company of B&Q, Kingfisher, revealed a major investment plan just weeks after Homebase’s new owner promised to put £500m into the business.

Kingfisher, which also owns the French chains Castorama and Brico Dépôt, promised to improve profits by £500m every year. But Véronique Laury, the chief executive, said the target would not be hit for at least five years and would cost £800m through cost-cutting, better sourcing of supplies, a major expansion of Screwfix Direct and an improved website.

Investors appeared unconvinced by the news, with the shares dropping by 6.12 per cent, or 21.10p, to 323.9p after Ms Laury said that the investment needed would see profits fall by about £50m this year and £70m to £100m in the second year.

“Following an in-depth review of Kingfisher’s business last year, alongside in-depth studies of our customers’ home-improvement needs, the leadership team announced the ‘One’ Kingfisher plan,” she said. “This plan will leverage the scale of the business by becoming a single, unified company where those customer needs always come first.

“We are excited to now reveal our new strategy and focus over the next five years, based on the key pillars of creating a unified, unique and leading home-improvement offer, driving our digital capability and optimising our operational efficiency.”

The plan comes after Home Retail Group sold rival Homebase to Wesfarmers for £340m. The business will be transformed with a £500m-investment and renamed Bunnings.

Analysts were cautiously positive. Jamie Merriman, a retail analyst at Bernstein, said: “Overall, we think this is an encouraging statement of the opportunity to improve profit at Kingfisher … [but] there is nothing that addresses headcount and organisational restructuring.”

Kingfisher added that it would return £600m to investors through a shares buyback scheme.

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