Kingfisher to downsize some stores

Kingfisher says it could shrink some of its “big box” B&Q stores as more of its sales move on to the internet.

Ian Cheshire, chief executive, said some of the its big stores were “overspaced, and we need to do something with them.”

While B&Q, which has 360 stores in the UK, had some outlets which were “very big warehouses and very successful,” for others it would need to examine how to use excess space. This could include shrinking the store or using the space for DIY classes or another type of service for consumers. B&Q is also continuing to roll out its offer to the building trade.

Kingfisher is the latest retailer to raise questions about the future of “big box” retailing given the rise of internet shopping. Mr Cheshire said sales of garden sheds and power tools were migrating online, while paint continued to be bought in stores because it was difficult to judge colours online and was highly flammable to transport.

B&Q also has 57 leases expiring over the next five years.

The comments came as Kingfisher reported pre-tax profits of £797m, up 19 per cent on 2010. Turnover rose by a more modest 3.6 per cent in the period to £10.8bn.

In the UK, pre-tax profits from retail rose 11.6 per cent to £271m, despite a fall in like-for-like sales of 1.4 per cent to £4.3bn.

Kingfisher also said its new five-year plan “creating the leader” would deliver £300m of additional profit from its retail operations in five years.

Mr Cheshire was more upbeat on the UK consumer. B&Q is gearing up for the Queen’s diamond jubilee with special jubilee garden gnomes.

“The dial has moved slightly more positive, but I am not getting carried away,” he said.

He expected inflation to fall later this year, which would make the squeeze on disposable incomes “slightly less dramatic.” There were signs of the labour market stabilising, while the Jubilee and Olympics should also bring a feelgood factor.

“All joking about gnomes aside, people will still feel better in a year of jubilee and Olympics,” he said.

Kingfisher’s Chinese business continued to make a loss, however. Changes to the business model helped to ease losses from £8m in 2010 to £3m this year. Kingfisher has changed its Chinese strategy to a “do it for me” model, as DIY is less popular there, and is experimenting with a showroom format featuring model apartments.

The company will pay a full-year dividend of 8.84p, a 1.77p increase on 2010.

The shares rose 7.4p to 307.4p.