Kingfisher PLC KGF

Kingfisher, the largest home improvement retailer in Europe (with nearly GBP 11 billion in revenue in 2012), has shown steady gains despite the economic malaise present in its primary markets. Nearly a decade ago, management took steps to demerge, dispose of, or close several one-off or loss-making businesses, changing course from the empire-building mentality which had become more common across global corporations. During the depths of the downturn, the firm embarked on a successful four-year seven-phase "self-help" initiative (called "Delivering Value") designed to improve performance in existing markets and expand its retail network. Since 2008 adjusted pretax profit, adjusted basic EPS, and standard return on capital metrics have more than doubled, while net debt dropped by GBP 1.4 billion. Today the firm is refocused on delivering faster growth and even higher returns. While we're concerned about the pace (lack) of recovery in the Economic Union, we believe the ongoing upgrades will strengthen the firm's competitive position. Kingfisher earns a narrow economic moat rating because of its economies of scale, in our view.