Kingfisher: France Struggles; Strong Growth From Poland & Romania

Kingfisher has reported unaudited results for the six months ended 31st July 2019.

Information regarding the Group's UK business can be found here:

Screwfix Growth Counters B&Q Decline in UK & Ireland

Screwfix Like-For-Like Sales Rise by 5.1%

France

Kingfisher France sales decreased by 4.2% (-4.4% LFL) to £2,158 million. According to Banque de France data*, sales for the home improvement market were up 1.9% and continue to be volatile from month to month. Gross margin % increased by 60 basis points with the benefit of lower promotional activity at Brico Dépôt partly offset by a weak performance at Castorama France, including impacts from logistics & stock inefficiencies. Retail profit decreased by 12.2% to £114 million.

Castorama total sales declined by 4.3% (-4.3% LFL) to £1,143 million reflecting price repositioning (c. -2% impact on LFL sales), and the impact of transformation-related activity (c. -2% impact on LFL sales). LFL sales of weather-related categories were down 4.1% while sales of non-weather-related categories, including showroom, were down 4.5%. Further commentary on the performance of Castorama France is detailed in Section 1 of this release.

Brico Dépôt total sales declined by 4.2% (-4.6% LFL) to £1,015 million driven by the proactive reduction of low margin promotional activity, which impacted LFL sales by c. -5%. Gross profit and gross margin % both increased year on year.

Across the two businesses, space remained broadly flat.

Other International 

Other International total sales increased by 1.8% (+1.2% LFL) to £1,184 million reflecting growth in Poland and Romania. Retail profit decreased by 0.9% to £75 million, reflecting a modest decline in Poland and similar combined losses in Romania, Russia, and Screwfix Germany.

Sales in Poland were up 5.2% (+3.3% LFL) to £753 million. Two new stores were opened in H1. The removal of one further Sunday of trading each month had an estimated adverse impact on LFL sales of c. 1%. LFL sales of weather-related categories were up 5.1% while sales of non-weather-related categories, including showroom, were up 2.9%. Gross margin % was down 20 basis points reflecting higher sales of weather-related categories and higher clearance. Retail profit decreased by 0.5% to £88 million reflecting good sales growth offset by higher costs, largely driven by wage inflation, higher digital costs and pre-opening costs.

Romania sales increased by 4.1% (+10.5% LFL) to £96 million with a good performance of unified & unique ranges. The business made a retail loss of £8 million (2018/19: £7 million reported retail loss) driven by losses in the former Praktiker stores, which have been rebranded to Brico Dépôt with the final store to complete in H2 19/20. The back-office integration process for the businesses will commence towards the end of the year.

At Q3 18/19 we announced the decision to exit Russia and Iberia to focus on markets where we have, or can reach, a market leading position. At FY 18/19 we announced that we would close our 19 Screwfix Germany outlets and retain an online presence.
In Iberia* sales decreased by 3.6% (-3.6% LFL) to £176 million, with retail profit decreasing by 5.0% to £3 million.

In Russia sales declined by 6.9% (-6.9% LFL) to £154 million. The business delivered a retail loss of £7 million (2018/19: £5 million reported retail loss) reflecting a continuing challenging market environment and one store closure.

In Screwfix Germany, all 19 stores were closed during the period and the business made a £4 million retail loss (2018/19: £7 million reported retail loss). Screwfix maintains an online presence in Germany through its European website.

In Turkey, Kingfisher’s 50% JV, Koçtaş, contributed retail profit of £3 million (2018/19: £2 million reported retail profit).

Source : Insight DIY Team and Kingfisher

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