The demise of Focus, pancaked under a pile of debt, brings long-expected consolidation in the DIY sector and a big beneficiary will be Kingfisher.
The owner of market-leading B&Q is snapping up 31 Focus stores from the administrator for £23m, extending its portfolio in places underserved by its existing network. Kingfisher’s ability to act decisively was no surprise. Since Ian Cheshire took charge in 2008 he and his team have done a good repair job on a business that, back then, badly needed a bit of maintenance.
During Cheshire’s tenure, Kingfisher has epitomised the self-help mindset that has enabled the best retailers to adapt, whether in response to particular difficulties or the wider ravages of recession.
Cheshire’s strategy has covered all bases from greater financial rigour to improved efficiency and strengthened management. Crucially the customer has not been forgotten. Product innovation is one of the priorities and action to stimulate demand, such as educating consumers about how to undertake projects, is helping.
The results were evident in Kingfisher’s prelims in March, showing a rise in group profits and at the core UK and Ireland division, despite a sales fall there. There is probably more to come. Broker Shore, for instance, last week initiated coverage with a buy note citing “superior growth potential”.
Adversity brought the collapse of Focus, but has provided opportunity for Kingfisher.
Electricals failure
DIY is not the only sector where consolidation is a talking point. The prosciutto-thin margins and intense competition in electricals might result in a casualty and Comet – which has parted ways with boss Hugh Harvey and is on course for a full-year loss – looks in jeopardy.
Stakebuilding by investor Knight Vinke has stoked speculation that a sale might be engineered. The question is who would buy Comet?
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