France and England are an odd couple.
With just 21 miles between the two nations, it makes sense that they like doing business together but culturally there is a big divide that means they don’t always see eye-to-eye.
Could this cultural divide have been the undoing of Kingfisher PLC (LON:KNG) boss Véronique Laury?
On Wednesday, Laury announced she was stepping down as chief executive after just four years in charge of the DIY retailer, which owns B&Q and Screwfix in the UK and Castorama and Brico Depot in France.
READ: Kingfisher CEO Véronique Laury to leave as the B&Q owner posts slump in 2018 profit
Ahead of her departure, a former insider had described Kingfisher as “a federation of national bodies” held back by a power struggle between its English and French factions, according to a report by The Times.
Kingfisher CEO's departure seen coming
Kingfisher’s decision to look for a new chief executive came as little surprise to the market.
Earlier this year, media reports said Kingfisher was considering sacking Laury after her ambitious five-year plan to consolidate the company’s unwieldy buying operations failed to deliver improved profits.
The transformation, which is now entering its fourth year, is set to cost £800mln over the five years and involves unifying product ranges across brands, investing in e-commerce and making cost savings.
Laury had hoped to increase profits by £500mln by the end of the restructuring but she ditched this target on Wednesday, saying it “no longer reflected the way the company is managed”.
“The engine is now largely built and we are confident in delivering significant financial benefits over time,” she said in the company’s 2018 full year results statement.
“We are targeting growth in sales, margin and returns over the medium term.”
Last year, statutory pre-tax profit plunged by 52.8% to £322mln, reflecting about £120mln in restructuring costs.
Even without the one-off costs, underlying pre-tax profit fell 13% to £693mln as like-for-like sales dropped 1.6%.
Weak sales at Castorama and B&Q
The biggest thorn in Kingfisher’s side has been the French Castorama business, which saw same store sales fall 7.1% last year.
Same-store sales at B&Q have also been sluggish, falling 3.0% last year.
Granted, weak consumer confidence in the UK and France has not helped matters but shareholders want to see sales and profits moving forward all the same.
Weaker sales at B&Q and Castorama has led Kingfisher to rely on Screwfix for revenue growth.
The group has tried to replicate the success of Screwfix elsewhere in Europe but the business has run into its own set of problems outside the UK.
Screwfix made a £16mln loss in Germany last year, prompting Kingfisher to decide to close all 19 of its outlets in the country, although it will maintain an online presence there.
The retailer is also considering the closure of 15 poor performing stores across the business over next two years.
The move follows the decision to pull out of Russia, Spain and Portugal last November, leaving Kingfisher with a portfolio that spans 10 European countries.
Next CEO has tough job ahead
Kingfisher has now kicked off the search for a new chief executive but whoever takes the helm next will have a big job on their hands.
AJ Bell investment director, Russ Mould, said investors will probably be pleased about Laury’s departure, given that shares have fallen 24% since she became boss in December 2014.
“But finding the right person is still crucial to putting Kingfisher back on track,” he added.
“Whoever gets the top job will walk into a lengthy turnaround programme that hasn’t really yielded the desired results.
“They may find it easier to rip up the plan and start again rather than make small changes.”
Given the rumoured “power struggle” between the UK and French units, could Kingfisher decide to appoint a British CEO and will he or she decide it's best to hive off its European operations and concentrate on business at home?
Other disastrous international retail expansions
Kingfisher is not the only retailer to have had struggles with businesses outside its home country.
Australian DIY retailer, Wesfarmers, had a disastrous foray into the UK with its acquisition of Homebase.
Wesfarmers, which owns the popular home retail business Bunnings in Australia, had bought Homebase for £340mln in 2016 but ended up selling the chain for £1 to restructuring specialist Hilco just two years later.
Wesfarmers had planned to spend £500mln on revamping Homebase, turning it into a British version of Bunnings but it failed to understand the UK market, leading to heavy losses.
It was considered to be one of the most disastrous ever retail takeovers, alongside Tesco’s ill-fated expansion in the US market with the Fresh & Easy grocery chain.