Retail giant Kingfisher today said a demerger of its Superdrug and Woolworths high-street chains was still on track.
The group, which announced a 16% dive in full-year profits, unveiled plans to demerge its General Merchandise business last September in a bid to focus on its wider electrical and DIY operations, including B&Q and Comet. Speculation has grown that Kingfisher could sell Superdrug to Dutch pharmacy group Kruidvat, although there was no announcement on any deal today.
Kingfisher chief executive Sir Geoffrey Mulcahy said the group “continues to consider a number of approaches for both Superdrug and Woolworths.” However, the group would only pursue them if they created “overall better value” for shareholders. Plans for the demerger were “progressing well” and that they were still on schedule “for implementation in the second quarter” – which begins in three months’ time.
Former Railtrack chief executive Gerald Corbett was last month drafted in to run the Woolworths chain. Group pre-tax profits, before exceptionals, slumped to £606m over the 12 months to February 3, compared with £720.6m the year before. Woolworths’ profit fell by £30.9m.
Kingfisher said “intense competition” on the high street led to a 25% fall in Woolworths’ retail profit at £91m. Although overall sales jumped 5.2%, Sir Geoffrey said Woolworths’ margins were lower to ensure the business was competitive in categories such as home entertainment. Woolworths also performed badly in higher margin markets, including clothing and homeware.
Sir Geoffrey said an action plan was now underway to restore Woolworths to growth as quickly as possible, with a focus on sales and cost efficiencies.
Superdrug’s profits also plunged, by over 15% to £35m, after a first half marked by poor “price competitiveness” and product availability. The second half of the year saw an improvement following the appointment of a new management team and a more focused promotional programme. Overall group turnover jumped 11.5% to £12.1bn, compared with £10.9bn the year before.
EGi News 14/03/01
