LONDON (Reuters) - Kingfisher (KGF.L), Europe’s biggest home improvement retailer, plans to close 60 B&Q stores in Britain over the next two years at a cost of 350 million pounds ($517 million), saying it has too many shops for the size of the market.
New Chief Executive Veronique Laury announced the closure of 15 percent of B&Q’s space on Tuesday as she set out her vision for the group, which also trades as Screwfix in Britain and Castorama and Brico Depot in France and other countries.
Britain’s home improvement sector is overspaced and last October Homebase HOME.L, the country’s No. 2 player, said it would close a quarter of its 323 stores by 2018 as Britons had fallen out of love with home improvement.
“We’ve known for many years that we have too much space in B&Q ... We have 360 B&Q stores (in the UK) and we have 100 Castorama stores (in France) for the same amount of population,” said Laury, who succeeded Ian Cheshire in December.
The announcement came as Kingfisher posted a 7.5 percent fall in 2014-15 profit. It said that while it was encouraged by Britain’s improving economy, it remained cautious on the outlook for France, its biggest market.
Shares in the company, the world’s No. 3 do-it-yourself (DIY) player behind U.S. groups Lowe’s (LOW.N) and Home Depot (HD.N), have fallen 12 percent over the last year. But they rose up to 5 percent on Tuesday and were the top riser on Britain’s FTSE 100 index of bluechip companies.
“The new CEO’s transformation plan sounds promising, and (the) results underline why it is necessary,” said Richard Hunter, head of equities at Hargreaves Lansdown.
Kingfisher said the B&Q closures would incur the company an exceptional charge of 350 million pounds, mainly related to lease provisions over two years.
It did not disclose how much money the move would save the company in the longer term. It said it was hopeful there would be little impact on jobs due to staff leaving and redeployments to other B&Q and Screwfix stores.
The group is this year opening another 60 Screwfix stores - which are smaller than B&Q outlets, and targeted at the building trade rather than ordinary consumers.
Laury also plans to close a handful of loss-making stores in Europe, develop unified garden and bathroom businesses and start a revitalisation programme for big stores across Europe.
“We need to organise ourselves very differently to unlock our potential,” she said.
“This will involve taking what is essentially a locally managed set of businesses and creating instead a single, unified company.”
One man who will lose his job is Kevin O’Byrne, CEO for B&Q UK and Ireland. O’Byrne, who lost out to Laury for the group’s top job, will leave the business on May 15.
Kingfisher made a pretax profit of 675 million pounds in the year to Jan. 31, in line with analysts’ expectations but down from 744 million in 2013-14.
The fall reflected slower sales in France since the summer of 2014, 34 million pounds of adverse currency movements and 22 million pounds in charges for entering new countries.
Sales rose 2.9 percent on a constant currency basis to 10.97 billion pounds.
Kingfisher ended the year with net cash of 329 million pounds, is paying a dividend of 10 pence, up 1 percent, and plans to return a further 200 million pounds to investors during 2015-16.
On Monday, Kingfisher’s proposed purchase of small French rival Mr Bricolage (MBRI.PA) collapsed.
Reporting by James Davey; Editing by Jason Neely and Pravin Char