B&Q Owner Eyes Screwfix Store Expansion

The cost of overhauling its business in the UK and Ireland (Other OTC: IRLD - news) has dented annual profits at B&Q's owner, Kingfisher (LSE: KGF.L - news) .

The company said its "ambitious" plans to cut 65 stores and 3,000 jobs at the DIY chain were at the halfway stage and on track, though the impact had knocked statutory pre-tax profits by just over 20% in the year to the end of January.

They came in at £512m - also damaged by unfavourable exchange rates.

Kingfisher has moved to cut less profitable B&Q stores and invest more in its trade-focused hardware operation, Screwfix.

Screwfix was credited with driving trading profits slightly higher - to £686m for the group - with UK retail profits 18% up on the back of £1bn in sales for Screwfix.

Kingfisher said it believed there was the potential for 600 Screwfix outlets in the UK - up from 457 currently - and it was continuing to trial the brand in Germany with "encouraging" results.

It (Other OTC: ITGL - news) announced in January - to a lukewarm reception from shareholders - a five-year transformation plan aimed at driving annual pre-tax profits £500m higher.

The company put a one-off £800m cost on delivering the strategy.

Its share price rose 3% in early trading on Wednesday.

Matthew Rubin, senior analyst at Verdict Retail, said that while Screwfix was the "big highlight" for Kingfisher in the UK, it would need to be on its toes as B&Q rival Homebase nets a new, Australian, owner and prepares to rebrand as Bunnings .

"B&Q needs to utilise the multichannel lessons being learnt by the online business to help it adapt to rapidly evolving, modern buying practices.

"At 29%, online growth at B&Q is strong, but still represents just 6.4% of the business’s sales.

"This is set to keep growing quickly and, as a result, may require a more fundamental review of the store portfolio.

"B&Q’s management have shown themselves to be proactive and prepared to take tough decisions, but as competition is set to hot up with the new Australian entrant, accompanied by significant investment, their ability to keep B&Q in a dominant position will be tested", he warned.