Going strong in the UK.

Kingfisher expected to exit China

Published:  15 June, 2010

LONDON: Analysts expect B&Q owner Kingfisher to withdraw from loss-making operations in China.

The problems in China have been well flagged, but it seems chief executive Ian Cheshire is considering pulling the plug next year according to newspaper reports.

In 2008-09 Kingfisher's China business posted a £60m loss that was reduced to £34m last year. It has announced a restructuring plan that included an accounting charge of £107m and a goodwill write-off of £124m in March 2009. The chain of 63 stores has been shrunk to 43 and trading over the next 12 months is key to its future.

Kingfisher was an early entrant to China more than a decade ago. Not long after it expanded into France through the acquisition of Castorama then store openings in Turkey, Russia, and Poland. Growth overseas now accounts for 60% of the retailer's sales and profits - the highest proportion of any FTSE firm. Sales from outside the UK accounted for £6bn of the total £10bn posted for the year to January 2010.

Kate Calvert, an analyst at Shore Capital said: "Poland is going backwards, Russia is at break-even and Kingfisher was forced to pull out of Taiwan completely."

The company said it never expected China to be a DIY market. "It is a 'Do It For Me' market," said a spokesperson.

"Our customers are either the emerging middle class who want a full apartment fit-out or tradesman who don't want to traipse round several different smaller stores for their goods."

B&Q has adapted to the local market by creating design centres to sell complete fit-outs of flats. But this does not seem to have caught on.

Kingfisher said its Chinese problems are more to do with a slump in the housing market and that it expanded too quickly.

Ms Calvert said: "Exiting China is very much on the agenda. It has not made any operating profit out of the business in totality and it is still not convinced it has found the right format after ten years."

In the UK, B&Q is spending £25m in a make-over of its joinery, power tools, hand tools, electrical and plumbing aisles and adding 4000 new lines across the building category.

From August, B&Q will make-over its joinery shop offering a range of over 1200 doors a huge stocked stair case range and a specialist timber cutting service in 147 stores.

Power tools and hand tool ranges will be refreshed in the autumn including the launch of an exclusive range of JCB power and hand tools, storage, tool boxes, work wear and clothing ranges.

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