Europe's biggest home improvements retailer Kingfisher today unveiled plans to close a third of its loss-making Chinese stores and said it expected a "very challenging" year as it met forecasts with a small profit rise.
The firm, which runs market leaders B&Q in Britain and Castorama in France, said it also planned to cut capital spending, working capital and reduce costs in the UK as it seeks to counter a consumer downturn in most of its markets.
Profit before tax and one-off items rose 3.1 per cent to £368 million in the year ended January 31st.
Sales from continuing operations rose 10.8 per cent to £10.03 billion, but were down 4.1 per cent on a same-store basis.
B&Q China made a loss of £52 million, hit by a property slump, and Kingfisher said it would respond by shutting 22 and downsizing 17 of its 63 stores there.
It will revamp the rest as part of a plan that will lead to an exceptional accounting charge of £107 million.
There will also be a non-cash one-off impairment charge of £160 million, £124 million of which relates to writing off goodwill at the Chinese business.
Kingfisher, which runs over 800 stores in eight countries, has been hit hard by the global economic downturn.
However, its shares have outperformed the DJ Stoxx European retail index .SXRP by almost 30 per cent over the past year, helped by optimism over chief executive Ian Cheshire's turnaround plan -- a mix of cost savings and expansion in stronger markets like Poland and Turkey.
"Although we anticipate the next year to continue to be very challenging, we will remain focussed on providing the best choice and value for our customers whilst managing our margins, costs and working capital tightly," Mr Cheshire said in a statement.
Kingfisher said it would cut capital spending to £300 million in 2009-10 from £390 million in 2008-9. It will also aim to reduce working capital by a further £50 million and reduce costs in the UK by 1 per cent year-on-year.
Kingfisher shares closed at 142.3 pence yesterday, valuing the business at about £3.4 billion.