Kingfisher Shares Drop on Cost to Implement Strategy Revamp

  • Retailer sees 500 million-pound boost to annual pretax profit
  • Strategic plan to result in charge of 800 million pounds

Kingfisher Plc shares fell after Europe’s largest home-improvement retailer revealed that a five-year plan to boost profit will come at a cost to short-term earnings.

Pretax profit will be boosted by 500 million pounds ($715 million) annually after five years, according to a statement from the company, which last year made 675 million pounds on that basis. As a result of the changes, which include unifying buying and operations across its chains, Kingfisher expects to incur cash costs of 800 million pounds. The stock fell as much as 3.6 percent.

“The up-front investment comes at a reasonably significant cost to forecasts,” Simon Bowler, an analyst at Exane BNP Paribas said in a note. “That requires some vision for shareholders to buy into."

Fleshing out her strategy for the business after about a year in the job, Chief Executive Officer Veronique Laury unveiled plans to return 600 million pounds to shareholders over three years, in addition to normal dividends. Competition for the company’s B&Q chain may have just got tougher in the U.K. after Wesfarmers Ltd. agreed to acquire rival Homebase.

Profit will be negatively impacted by about 50 million pounds in the first year of its plan and by between 70 million and 100 million pounds in the following year, Kingfisher said.

The stock fell 2.4 percent to 336.90 pence as of 8:28 a.m. in London.

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