Smart Investor: Kingfisher is quality – and shares are cheap

Kingfisher- B and Q- has room for improvement in many areas, not least service, logistics and product quality.

We are trade account holders and former shareholders. I was glad to sell out and get our money back after years of experiencing this shambles of a company at first hand.

Frankly, the senior management couldn't run a bath!

One of the many idiotic things they have done, presumably to further infuriate long-suffering customers, is to abolish most of their tills. Most people waiting to check out from some stupid machine will tell you they hate it. Hate it!

Furthermore, these machines often still have to be staffed, for complicated reasons.

Ask any builder about B and Q delivery and he will not know whether to laugh or cry.

We were at an early morning opening, to check out kitchens. The other man there asked what we were looking at. When I said "kitchens" he erupted and said: "Whatever you do, don't buy a kitchen from B and Q"

He recounted a long series of disastrous attempts at delivery, over several months. Imagine what this costs builders, with carpenters waiting to do installations.

We had similar experiences: order now and get delivery in three months, bit by bit. One time we told them not to deliver wardrobes in a large truck because of delivery problems. What happens? They send the world's largest truck and a message saying "We couldn't get access." Oh really?

On another occasion I told our carpenter I was planning to order a B and Q kitchen. I still have his e-mail response, which started out "Nooooo!"

Delivery and quality problems happen time and again with them. Ever had to put on four coats of their crappy paint?

We have found Howdens Joinery vastly more efficient at supply and delivery of kitchens and bathroom furniture, not least because they make their own joinery in Britain. (I am not connected to either firm.)

So I wouldn't look at buying Kingfisher shares, as the company is a shambles. They didn't even respond to my letters of complaint! A most useless management.

Have to agree

I will not shop anywhere where they try to force me to do my own checkout work for nothing!!

Sainsburys take note.

So, if the dividend is below average and it will take time for the price to increase significantly, why on earth should I buy B&Q now?

Sadly, the only chance of profit from buying Kingfisher will be a takeover by another company that has a better idea of management in this area. Anybody visiting a B & Q branch will see for themselves the many problems that exist. As they say in another country " For me? NO"

Whenever I return home after a visit to B&Q I am usually angry and frustrated. I don't shop there much any more; most of the stuff they sell can be bought for less elsewhere. Long delivery times, poor product quality, high prices, etc etc. I certainly wouldn't invest in this company.

Compare B&Q with Home Depot, a similar but much better managed operation in Canada, and you can see the only hope forB&Q is new management! How long will one have to wait for that? They are cheap for a reason. It's too big a gamble to wait for change, unless perhaps they were on a 6% yield!

Dennis re Sainsbury's I so agree with you. I don't mind the odd self serve tills for small baskets of shopping but when large numbers of checkouts are replaced by these things and you are expected to put a whole weeks groceries through it's a quick way to loose goodwill and customers. As for B&Q I don't go there anymore for this reason and much prefer Wickes for striaghtforward quality and customer service.

Its interesting how our personal experience with a company affects our willingness to invest. All of the above comments on customer service, self service tills, etc. apply equally well to Tesco, yet I would suggest that most people would consider Tesco to be a well run business.

Reading the comments again, I can't see anything apart from the self service tills that apply to Tesco!!

I have to agree wholeheartedly with Alan Franklin. He is spot on with his comments. Over the past 5 years or so two friends of mine have ordered kitchens from B & Q. Instead of it all arriving in one go it came in dribs and drabs. One of my friends had three lost days from work waiting in for bits to be delivered. When she complained that the kitchen cupboard doors had not been delivered she was told that the doors were only a 'cosmetic feature!'

I would argue that a kitchen cupboard without a door is a shelf.

The self service till idea is a disaster and I know of nobody that likes them.

It is quite obvious that the management are incompetent and out of touch with what the public wants. If a half decent rival was to appear I believe B & Q would sink without trace, and very quickly! They are only where they are at the moment because they have no serious competition.

I have worked in the City on share valuations (both public and private) in the context of M&A for years with the major firms of accountants and the investment banks, who are the experts in the field. If there is one thing I have learnt, it is that valuations by reference to NAV or book value (used for property companies, investment companies etc) are NOT relevant to trading companies whose true value lies in income and profits. In the latter case a DCF (discounted cash flow) or p/e or revenue multiple is the appropriate measure. Indeed, the tests are for the most part mutually exclusive. If you confuse the balance sheet and the P&L account in this way you arrive at inappropriate results.

I cannot see the relevance of book value to the true value of Kingfisher, as it only has any relevance on a sale of the assets or winding up. On a profitability or revenue basis this company looks to be poor value. To say it is cheap on the basis of its book value is simply misleading. I suggest this analyst goes back to basics and reads some theory on shares valuation.

Absolutely correct....Drake

This is the main difference between accurately valuing a PLC as opposed to a Private Ltd Co.

Nett Worth of a PLC is in no way as important as its ability to trade and return strong cashflows.and profits. except as Drake point out, when the issue is insolvency.

A PlC 's shares are worth what the market is prepared to pay for them at any point in time and as demand for them increases, prices will increrase also, and conversely, when huge amounts are sold.....

The Applied version of this was, ( if anyone of you guys are old enough to remember), the Guiness / Distillers matter.......

Seems to me, Smart Investor's reference to Warren Buffett's investment strategy (value investing) is a Red Herring. He only adopted it when everyone else went crazy during the dotcom bubble. Prior to that he was buying shares in newspapers with daily circulations and convincing management that they ought to be printing a Sunday edition. Also he was investing in companies with significant growth potential, such as Coca Cola, and Gillette.

The underlying success factor in everything he does is down to the fact that his insurance and re-insurance businesses provide the cashflow to finance further investment.

His recent investment moves suggest to me that he would not be interested in any companies which make up the mediocrity. Companies who are really in deep do do are approaching him, as the lender/investor of last resort; which means he can dictate terms.

In the case of Goldman Sachs, and Bank of America those terms were preference shares at swingeing rates of return and warrants at rock bottom prices.

Buyers of ordinary shares cannot follow his example, they are the fall guys, the last in the line of creditors, if the firm goes belly up.

As regards buying from B & Q, I much my local ironmonger and independent timber merchant, but I do pop in for odd things which they don't stock.

I don't need a kitchen right now, but on basis that I might sometime in the future I try to keep up to date. I watched a programme on the Quest Channel where Tommy Walsh and his Joiner friend, fitted a flat pack kitchen. All went well until they came to fit the open corner shelves at the end of wall units. Alas, the cornice over would not fit and they had to bodge it. So when I browsed around B & Qs displays I asked the "kitchen planner" what his solution to the problem was. Clearly he was completely flummoxed and had no idea, and resorted to abuse to get rid of me.

There is just one redeeming feature which I could mention in B & Qs favour. There car park is free, and I sometimes use it to go shopping elsewhere.

Stay clear this is a badly run company and is a shambles,I worked there for 14 years and regret every second! god how did I last that long? it was a means to an end for me.I have first hand knowledge of showrooms and management(which is a joke!)I was threatened time and time again by management who are bully boys who dont have a clue,managers play cards in the staff room and go home early,even on bank holidays when really busy,they could not care less and sell lots of poor quality shit,stay clear and go elswhere and do it now before u bq it and go mad!!!!!!!!!!!!!!!with shit service

I have to say more to my previous comments,please please avoid BQ you have no idea how bad it is run,by idiots I think they cant be called management because they dont know what the word means,I was good at my job,too good for them,I tried everyday to make things better,but you may as well talk to a brick wall! useless is not a strong enough word!

The underlying problem starts at the top and goes down to duty managers who are so poor you will cry! its people like me that sold and made them money! for peanuts and even then they wanted to reduce your pay!with threats!!!

they employ mad people,many dont stay 5minutes,as for store managers god help us all

Come on, guys, self-service tills are great - so long as you only have 4 items . . . . .

I go to Wickes for my DIY stuff because the only local B&Q is a vast depot and I can never find anything. The Wickes is in the town centre and has its own car park (and not even the local Waitrose has one of those!).

Not a particularly convicing case to buy...I can think of many other quality companies which I would buy in preference!

I have (only) 2 questions :

1) For the Kingfisher Board - Don't you think something needs to be done ??

2) What does SMART INVESTOR have to say (now) - to all this adverse

comment ??

There's no smoke without fire !!!!

I suggest an alternative - Halfords. Far superior revenues, profits, margins, dividend and also operating in a similar retail sphere that is considered to be as resilient as can be expected in the climate. All on a P.E of just 6. Now that IS cheap!

All big retailers are going to be hit by increasing pension costs post auto enrollment.

Sorry about the lateness of this but have only just picked the forum up. Let me start by saying I am 77 and semi-retired having held various positions of management during my working life, i.e. company director for a large international coach touring company, senior business manager for Whitbread’s, ICI and Zeneca Agrochemicals, so have had some experience both sides of the line. I now have a small part time job with B&Q, a replenishment customer advisor. I have found that B&Q are a very solid, well organised, hands on at all levels company. Their attitude towards their staff is absolutely first class. They have10 minute team briefs with all the staff almost daily, just to keep everyone up to speed. Their recycling programme has to be one of the best in the country. Their war on company waste – theft, damage, and leakage is very thorough. Being a tight ship with the captain in the wheel house. I cannot help but agree with Panmure Gordon that this company’s shares have got to go forward regardless of the economic climate, and will comfortably reach their target of 340p. With regards the gentleman who worked for B&Q’s for 14 years and hated every second of it, I would suggest that he has a problem and should seek medical advice. Words like masochism and sadism come to mind!