March 20, 2019 / 12:20 PM / in 4 months

Kingfisher CEO to leave after profits go into reverse

LONDON (Reuters) - Home improvement retailer Kingfisher is parting company with Chief Executive Véronique Laury after it reported a 13 percent fall in annual profit, more than halfway through a five-year transformation plan that was designed to boost earnings.

FILE PHOTO: Signs outside the B&Q and Screwfix stores in Loughborough, Britain March 23, 2016. REUTERS/Darren Staples

The group, whose main businesses are B&Q and Screwfix in Britain and Castorama and Brico Depot in France and elsewhere, has just entered the fourth year of a five-year program that aimed to raise annual profit by 500 million pounds ($663 million) from 2021.

However, profits actually went backwards in its 2018-19 year.

Kingfisher said on Wednesday that separating out the 500 million pound targeted profit improvement from the rest of the business no longer reflected how it is managed — effectively an abandonment of the target.

It is now targeting growth in group sales, gross margin, retail profit and return on capital employed “over the medium term”. It forecast a flat gross margin in the 2019-20 year.

Its shares were down 2.4 percent at 1142 GMT, extending year-on-year losses to 29 percent.

Kingfisher said the search for a new CEO had started and was supported by Laury, 53, who has been the boss since December 2014 - one of only a small number of women in charge of top British companies. She will continue in her role until a departure date had been confirmed.

Kingfisher also said Steve Willett, chief transformation, digital and IT officer, was retiring after 20 years at the company.

“A new CEO has an opportunity to set out a strategy to reshape and modernize the business with more realistic expectations, however we also think there is a strong chance of a margin reset to try to drive stronger sales,” said RBC Europe analyst Richard Chamberlain.

FRENCH WEAKNESS

The home improvement market has been tough in Britain where Australia’s Wesfarmers came unstuck after a failed investment in the Homebase chain. Kingfisher said the UK market remains uncertain and it was mindful of softer housing market activity in France.

It plans to exit Screwfix in Germany with the closure of 15 stores and is considering the closing another 15 poorly performing stores across the business over the next two years.

Underlying pretax profit fell 13 percent to 693 million pounds in the year to Jan. 31, 2019, reflecting weakness in Castorama France and losses in Russia and Romania. Sales rose 0.3 percent to 11.7 billion pounds.

“As we approach the completion of our main transformation work (Laury) feels unable to make the multi-year commitment that’s required to tackle the next stage of our journey,” Chairman Andy Cosslett told reporters.

“We’ve therefore agreed together that this is the year in which she will pass the baton to her successor.”

Cosslett said the board had completed a “thorough review” of Kingfisher’s strategy which confirmed it fully supported it.

Laury’s plan for the group, costing 800 million pounds over five years, involves unifying product ranges across brands, boosting e-commerce and seeking efficiency savings.

So far 50 percent of products are unified, 100 million pounds of operational efficiencies have been delivered and the roll-out of a united IT platform is substantially complete.

FILE PHOTO: A B&Q store is seen in London, Britain March 31, 2015. REUTERS/Stefan Wermuth

The company denied it had moved the goalposts in its handling of the 500 million pound profit improvement target.

“We’re not making any excuses for things that don’t go our way,” said Chief Financial Officer Karen Witts, who is leaving the company on Thursday and will join catering firm Compass.

“But certainly we hadn’t imagined the extent to which we would be seeing lots of economic and geo-political turmoil which absolutely has an impact on our business,” she added.

Reporting by James Davey; Editing by Paul Sandle/Keith Weir

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