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Britain's Kingfisher will not handcuff new CEO on strategy

Britain's Kingfisher will not handcuff new CEO on strategy
FILE PHOTO: A passenger walks with her luggage in front of a Kingfisher Airlines reservation office at the domestic airport in Mumbai October 23, 2012. REUTERS/Danish Siddiqui -
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Danish Siddiqui(Reuters)
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By James Davey

LONDON (Reuters) – Britain’s Kingfisher <KGF.L> will give its new chief executive free rein to pursue whatever strategy he decides, even a possible break-up of the home improvement retailer, which has struggled to lift its earnings.

Carrefour veteran Thierry Garnier is due to succeed Véronique Laury as CEO of Kingfisher, whose main businesses are B&Q and Screwfix in Britain and Castorama and Brico Depot in France, on Sept. 25.

“There’s no handcuffs on Thierry’s arrival into the company, he’ll take his own independent view of all moving parts of the business,” chairman Andy Cosslett told reporters when asked about the possibility of breaking up the group.

Kingfisher is in the fourth year of a five-year programme that was designed to boost earnings. However, profits reversed in 2018-19 and the group said in March it would part company with Laury, who has been its CEO since 2014.

Although Cosslett said the board was not “iron clad” on Kingfisher’s current structure, it believed “that the current composition of the group” gave it the scale it needed.

Kingfisher, which trades from more than 1,300 stores in 10 countries across Europe, including Poland and Romania, said in November last year that it would pull out of Russia, Spain and Portugal.

A 6.4% fall in first half profit at Kingfisher underlined the task Garnier faces, particularly in France, where like-for-like sales fell 4.4%, and at B&Q, where they were down 3.2%.

Laury’s strategy, costing 800 million pounds over five years, involves unifying product ranges across brands, boosting e-commerce and seeking efficiency savings.

VULNERABLE

Kingfisher shares were down 2.7% at 0943 GMT, extending losses for the year to 26% which some analysts believe makes it vulnerable to a possible private equity bid.

“We’re not happy where the share price is but we think through our own efforts we can get that moving quite quickly once we start delivering better performance through execution,” Cosslett said.

Kingfisher said it made an underlying pretax profit of 353 million pounds in the six months to July 31.

While ahead of analysts’ average forecast of 342 million pounds, it was down from 377 million pounds made in the same period last year.

Total sales fell 0.9% on a constant currency basis to 6 billion pounds. Like-for-like sales were down 1.8%, with growth in Screwfix, Poland and Romania offset by B&Q and France.

Kingfisher said its outlook by geography remained mixed, highlighting continued uncertainty around UK consumer demand ahead of Britain’s planned European Union exit.

“For bigger ticket items I think there’s a great deal of uncertainty and anxiety about what the future immediately holds,” said the chairman.

Kingfisher maintained its forecast for a flat gross margin for the full 2019-20 year.

Prior to Wednesday’s update analysts were on average forecasting a 2019-20 underlying pretax profit of 658 million pounds, down from 693 million pounds made in 2018-19.

(Reporting by James Davey; Editing by Shri Navaratnam, Kate Holton and Alexander Smith)

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