I enjoy a spot of DIY. I have most of the basics down, and am happy to get my hands dirty. If something in the house needs fixing, I pop down to my local B&Q, which is owned by Kingfisher (LON:KGF) (LSE: KGF), get what I need and roll up my sleeves. But I am, it seems, in the minority, with an ever growing trend in the UK and parts of Europe, to hire tradesmen for even the simplest of jobs.
It is in this environment that Kingfisher now has to try and succeed, and to do so it is starting at the top.
Shopping around Following the resignation of CEO Véronique Laury earlier this year – after she was forced to ditch profit targets that were linked to the company’s transformation programme – Kingfisher today announced it will be bringing in Carrefour’s Thierry Garnier, who previously headed up the French hypermarket’s Asia division.
This choice is, the company says, due to Garnier’s success in building up Carrefour’s business in China, a competitive and difficult market where the French retailer is one of the few European companies that has managed to hold its own. This certainly seems like it might hold him in good stead for what lies ahead.
French problems Though its UK operations saw a mild increase in sales in its latest quarter (thanks in the main, to a “good weather boost“), it is France where Kingfisher is seeing real problems. Last year it announced it would be exiting the “peripheral” markets of Russia, Portugal and Spain, in order to concentrate on its French brands, where rival Leroy Merlin has been gobbling up market share and hitting its sales figures.
Same-store sales at its two French brands fell 3.7% in Q1, with its Brico Dépôt stores seeing like-for-like sales dropping more than 5%. These problems are, said Laury (before her exit), offsetting the improvements made by her transformation programme.
Can he fix it? So will a new CEO really be able to turn things around? Well, maybe.
It is true that he was successful in establishing Carrefour (PA:CARR) in a very difficult market, where branding and cultural differences have been for many, insurmountable issues. But as successful as he may be, it will be hard for him to fight the tide of fundamental change in the way people live their lives. Changing demographics and increasing affluence are the true factors that are weighing on the DIY industry.
At the same time, the now age-old story of digital retail taking over from bricks and mortar stores is also having an impact. There was a time when if you needed to do some serious DIY, stores like B&Q were the only places you could go. Now you can get these things at the push of a button on your phone – that isn’t going to change.
These shifting sands may not be the end of Kingfisher though. Its Screwfix business, which supplies mainly to the trade, has been seeing decent growth, ironically because of this same shit to hiring professionals to do the work. What’s more, one particular area of note where Garnier succeeded in China was in digital innovation. If he can manage to do this for Kingfisher, the company might be worth putting some money into.
Karl has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019