The owner of the DIY retailer B&Q has put its struggling Irish arm into a rescue process in a last-ditch effort to keep the business going.
Kingfisher (LSE: KGF.L - news) , the FTSE 100 (FTSE: ^FTSE - news) retail giant, said it had applied through the courts to put its nine large stores in the Republic of Ireland (OTC BB: IRLD - news) into examinership, a process similar to going into administration in the UK.
The group said that its losses in Ireland can no longer be sustained and that “in order to have a reasonable prospect of survival” it needs to close four of its stores and exit the relevant leases. Its appointed examiner, accountants PwC, will have the power to renegotiate contracts.
Kingfisher’s Irish stores, which currently employ around 690 people in total, have been badly hit by the country’s economic downturn, in particular the fall in consumer spending in the housing sector.
A weak housing market means that spending on home improvements tends to plummet, signalling pain for DIY retailers. While Kingfisher does not split out figures for its Irish business from the UK numbers, the Irish arm turned loss-making two years ago, while the UK stores have continued to stay in profit.
The company is understood to have already tried to reduce costs in terms of cutting staff hours and its marketing spend, and has spoken to its landlords about revising its rents - but with no real success.
Brian Mooney, chairman of B&Q Ireland, said: “The management team is hopeful that a sustainable business can emerge from the examinership process, based on a restructuring of the company.
“Our colleagues have been briefed on today’s development, and understand that the company’s objective in seeking the appointment of an examiner is to try to protect jobs and retain competition and consumer choice in the market. However, we cannot anticipate the outcome of this process which is subject to the examiner’s recommendations.”
Two stores have already been named for closure - Athlone and Waterford - in the papers Kingfisher supplied to court. If all four shut, it would be likely that around half the workforce go.
Kingfisher operates 1,000 around the world under various banners. Its shares fell 4.2, or 1.5pc, to 269.7p.