Watch my video interview on Kingfisher here (click on link below):

IB Times UK Video: The Attractions of B&Q, Screwfix owner Kingfisher



Kingfisher (LON:KGF), the owner of DIY businesses B&Q and Screwfix, has been taking flight over recent months, climbing from 286p in November 2014 to 374p today.

B&Q

But what you may not realise is that Kingfisher's biggest business geographically is in fact not in the UK, but actually in France with the Castorama and Brico Depot Do-It-Yourself chains of stores. The company's chief executive, Véronique Laury, is also based in France and took the reins in January after previous boss Sir Ian Cheshire stepped down.

Castorama Kingfisher's performance of late can be best described as somewhat schizophrenic. On the one hand, its two UK businesses have been performing well, in particular the Screwfix catalogue/online building supplies division, which posted 25% year-on-year total sales growth in the third quarter (to end-September 2014).

However, on the other hand, the French Castorama and Brico Depot DIY chains of stores have suffered from a weak French DIY market, hit by a triple whammy of fragile consumer confidence, higher taxes and declining house prices. These factors have led to an 8% fall in French retail profit in the third quarter (adjusted for currency movements).

The good news for Kingfisher is French consumer confidence is now in fact surging and has touched a three-year high, due to falling petrol prices (boosting purchasing power) and unemployment that has finally started to decline (Figure 1).

graph 1

Acquiring Mr Bricolage

With some of these gains in French purchasing power likely to be found in better home improvement sales going forwards, combined with the ongoing restructuring programme ("Creating the Leader" self-help initiatives), Kingfisher's French profitability should turn around sooner rather than later.

Helping this rebound in French profitability is the recent acquisition of smaller French DIY retail chain Mr Bricolage, which should result in further cost savings across the group's three French operations from enhanced purchasing power and closing of weaker stores to focus on the most profitable sites. Kingfisher's management has already indicated this acquisition should boost the group's earnings per share, delivering welcome…

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