Jim Armitage: Kingfisher supply chain shake-up looks like a botched job

FOR over a decade, successive bosses at B&Q giant Kingfisher have promised, and failed, to hammer together its global supply chain.

What’s the point in having dozens of different suppliers of identical screws, drills and light bulbs in Poland, Russia, France and the UK, they reasoned?

Far better to order from one maker of each and use your international clout to bash them down on price.

As with most DIY jobs, it’s proved far harder to do than they thought. Now, it’s Veronique Laury’s turn with the screwdriver. Halfway through a five-year review, she’s making a more determined fist of it than her predecessors, but, like them, bits keep falling off the job.

She pledged to make savings of £500 million a year from her turnaround project, of which the one-supplier-fits-all policy was to provide £350 million. Two-and-a-half years later, it’s looking increasingly unattainable.

One reason? Events, dear boy.

The UK economy is in a far weaker place than she’d expected when launching the plan pre-Brexit referendum. Given that 40% of Kingfisher’s profit comes from B&Q in Britain, that has hit hard.

But there’s self-inflicted harm too. In France — another 40% chunk of the business — they hadn’t figured on how much disruption the supply chain revolution would cause.

Laury had to discount the old, pre-unification stock to shift it. Then she realised she needed bigger warehouses. Finally, she got pricing of the new stock wrong, leaving Kingfisher’s Castorama chain looking more expensive than rivals.

Merging suppliers has been making savings — and is broadly on track — but the improvement in margins has been eaten away by bloopers like this.

There’s another thing: as part of the five-year plan on suppliers, Kingfisher also promised more exclusive lines of its own — fancy kitchens, bathrooms and homewares. A new products boss was hired from Ikea in the form of Arja Taaveniku. Wheeled out to meet the media this spring to talk of how swimmingly it was going, today, she’s out. While she’d got the bathroom ranges up to Ikea standards, kitchens and lighting are still well behind.

Added to all that, trading in Romania, Russia and Germany has been weak. Expect some, or all, to be put on the block in the coming months.

For shareholders, Kingfisher remains a conundrum. Laury’s plan won’t get profits up to £1.1 billion by 2021, as the market originally hoped. France has been mismanaged.

However, most of its problems are fixable. The French boss was replaced earlier this month, and the unification of product lines is proceeding on track.

Furthermore, there’s little debt and the shares today are at their lowest since 2011. Either Laury will push through some self-improvements, or activists will come in and demand some sort of break-up. Whichever way, the shares look cheap.