Kingfisher, the DIY retailer which operates the B&Q and Screwfix chains, has put its Irish division into the 'Examinership Process' as it attempts to save the loss-making arm.
B&Q is Britain's number-one garden centre chain with around 350 stores and 21,000 employees; it is nearly twice the size of its nearest competitor.
However in Ireland, the retailer, which operates just nine stores with 690 workers, has struggled to turn around losses as the company continues to be affected by the recession and the decline in consumer spending in the housing sector.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The 'Examinership Process', similar to the administration process in the UK, is "designed to facilitate the survival of the company", B&Q Ireland said in a statement.
"Despite remedial efforts by management, losses in the Irish market can no longer be sustained by the company, and it is hoped that a restructuring via examinership will provide for the potential for survival of some part of the business."
The company said that it would need to two close "uneconomic stores" in Athlone and Waterford and negotiate improved terms with landlords for the remaining sites. However, a further two stores will be shut down due to the required change to terms, the firm said.
Commenting on the issue, B&Q Ireland Chairman Brian Mooney said: "The management team is hopeful that a sustainable business can emerge from the examinership process, based on a restructuring of the company. Our priority remains our employees and our customers."
"Our colleagues have been briefed on today's development, and understand that the company's objective in seeking the appointment of an Examiner is to try to protect jobs and retain competition and consumer choice in the market. However, we cannot anticipate the outcome of this process which is subject to the Examiner's recommendations."
For the time being, B&Q Ireland said it will continue to trade at all nine stores across the country as usual and all employees will be paid.
Analysts have concernsIn a research report on Friday, analyst Freddie George from Seymour Pierce said that the news "highlights out concerns for the UK business".
He said that Kingfisher has too much space for a multi-channel society "while its stores are too large, difficult to shop and not aligned to the new trend for convenience".
"Gross margins have risen by over three percentage points points in both the UK and France over the last five years and, in our view, are likely to come under pressure as a number of initiatives approach conclusion," he said.
He speculated that the company's woes in Ireland could deter it from announcing a share buy-back in March.
Despite the news, shares were up 1.19% at 272.9p in afternoon trade in London.
-
Christmas at Chatsworth: review of The Cavendish Hotel at BaslowMoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
