Consumer

Andrea Felsted is a Bloomberg Gadfly columnist covering the consumer and retail industries. She previously worked at the Financial Times.

The home improvement market has gone from "Do It Yourself" to "Do It For Me." The trouble is, Kingfisher isn't really doing it at all for many consumers.

In a mature sector, and saddled with too many big stores, the European chain is struggling to make itself relevant to a generation whose idea of DIY is to call a professional.

Consequently, on Monday, CEO Veronique Laury set out her vision to respond to Kingfisher's many challenges: which include too many products and an under-performing French business.

Her answer is "One Kingfisher," the company's latest strategic blueprint. The trouble is, investors could be forgiven for thinking they've heard it all before.

A succession of similar plans have been issued by the company over the past decade. "Delivering Value" and "Creating the Leader," both unveiled by former CEO Sir Ian Cheshire, were long on management speak and short on real progress. The company is trying to switch focus to its faster-growing Screwfix trade stores, but alongside price-cutting by rivals, that might squeeze the operating margin, according to Bloomberg Intelligence.

Under Pressure
Kingfisher margins may be pressured by competition and strategy shift
Bloomberg Intelligence

At the center of all the strategic overhauls is an attempt to increase the number of products Kingfisher buys centrally, rather than through divisions. The idea is that if it can harmonize this, it can generate the savings to help ease its transition away from big-box retail stores.

Laury's new strategy promises an extra 500 million pounds ($711 million) of profit by the end of its fifth year, and the prospect of returning 600 million pounds to shareholders. Although there's a cost: 800 million pounds in cash.

And despite all the efforts over the years, just a fraction of products are bought centrally.

It’s the same for boosting online sales, another plank of Laury's plan. They are just 2 percent of group sales, including Screwfix, the faster growing trade offering, where there is a higher propensity to buy online. So while there's opportunity here, the company's record encourages doubt.

Home Improvements
Screwfix sales are growing quickly in the U.K. but are still a fraction of the mature consumer business B&Q
Bloomberg Intelligence

Laury's supporters say it will be different this time. First of all, she heralds from Castorama, the French arm of Kingfisher, so may be more able to galvanize both the French and British divisions. There are hopes she'll have more success than Cheshire in putting central buying at the company's core. For example, one group-wide team will buy power tools rather than the different subsidiaries.

But recent history has shown that despite good intentions, Kingfisher often tends to be blown off course: by weather, economic slowdowns or currency movements.

Well-Drilled
Kingfisher shares have performed better than FTSE-100
Bloomberg

The shares haven't done too badly over the past five years, up 29 percent. That's better than the FTSE 100 index, but below a group of British retail peers.

One area where Kingsfisher has improved is in restructuring its balance sheet - it had net cash of 435 million pounds on August 1, according to the company.

Nevertheless, it operates in a market with little growth beyond its professional Screwfix stores. Laury has made a start by closing shops, but Kingfisher needs to do more, which Monday's statement shows will be costly. And Westfarmers' plan to revitalize the rival Homebase chain means competition will only intensify.

The shares fell 3.5 percent after the new strategy was unveiled, meaning they trade at about 14.2 times the next 12 months' earnings, a discount to the global home improvement retail sector. When it comes to Kingfisher's own home makeover, the market's right to be skeptical.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Andrea Felsted in London at afelsted@bloomberg.net

To contact the editor responsible for this story:
James Boxell at jboxell@bloomberg.net