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B&Q sales slide, as Screwfix decision to exit German market costs millions

Published: 18 September 2019 - Fiona Garcia
 

 

In the UK and Ireland, B&Q total sales dropped 3.3% to £1,773million in H1, impacted by the axing of installation services and declines across showroom and weather-related categories. Meanwhile, the closure of all 19 Screwfix outlets in Germany contributed towards an exceptional charge of £68million  

Kingfisher reported a number of exceptional items for the half year ended July 31, including a £68million restructuring charge relating to redundancy costs following the group’s plans to close 11 stores in France and 19 Screwfix Germany outlets.

Speaking to DIY Week last October, Screwfix operations and property director Scot Parsons said of German operations: “It is not on our agenda to do anything progressive with that at the moment. We’re reviewing where we’re at with the German market. At the moment, we have 19 stores in Germany and they are doing ok.”

The retailer described financial performance in the half as “mixed”. Screwfix, Poland and Romania delivered like-for-like sales growth for the period. However, sales at B&Q and Castorama France, were disappointing, with the retail group attributing declines to “a weak consumer backdrop in the UK and disruption caused by new range implementation”, alongside ongoing transformation-related issues at Castorama France.

B&Q like-for-like (LFL) sales declined by 3.2% in H1. The discontinuation of installation services had a negative impact of around -2%, said the retailer. The ongoing implementation of the new surfaces & décor ranges also had an effect, whilst LFL sales of weather-related categories decreased by 2.9% and sales of non-weather-related categories, including showroom, were down 3.4%. The retailer revealed plans to launch key new and differentiated ranges in H2, including B&Q kitchens.

Online was a more positive story, as B&Q’s total digital sales continued to make good progress, with sales growing by 10% and now representing 5% of total sales. The retailer also recorded a £1million profit in the period on the disposal of properties in the UK

Screwfix grew total sales by 9.9% (+5.1% LFL) to £882million, driven by specialist trade desks exclusive to plumbers and electricians, strong digital growth of 18% (now accounting for 32% of total sales); and the continued roll out of new outlets.

The retailer opened 16 new Screwfix outlets in H1 19/20, taking its estate to 643. The company’s longer-term target is to operate around 800 outlets in the UK, and the business said it remains “on track” to open stores in the Republic of Ireland in the second half of the year in order to complement its existing online presence.

Despite shutting down operations in Germany, Kingfisher said it remains “confident that the Screwfix model will work in markets outside of the UK”. As well as new openings set for the Republic of Ireland in 2019, the retailer explained it continues to “conduct validation for market entry opportunities in France and Poland, initially via an online presence”.

Total sales for the kingfisher Group were down 0.9% in constant currency.  Group gross margin percentage in the first half grew by 60 basis points, reaping the rewards of unified sourcing, as well as benefiting from price repositioning in Brico Dépôt France.

However, Kingfisher described the outlook across its main markets for the rest of the year as mixed, alluding to ongoing uncertainty in the UK sector. Additional impairments of £26million were recorded in H1, primarily relating to store assets in Russia following a deterioration in trading. The Group announced the decision to exit Russia and Iberia in November 2018 and recorded impairments of £16million to store and non-operational assets in the prior year. There have been reports that the group is struggling to sell the international operations. A source quoted in the Financial Times said the deal "proved a lot more tricky" than expected.

Outgoing CEO Véronique Laury said: “Our transformation activity continued in the first half of this year, including new range launches across the group and the rollout of further capabilities within our unified IT platform. These activities resulted in some ongoing disruption that impacted sales at B&Q and Castorama France. This was partly offset by positive sales performances in Screwfix, which continues to grow its market share, and Poland.

“It has been a great privilege to lead Kingfisher during a period of significant change, both in retail and within our business, and I would like to take this opportunity to thank all of our colleagues for their tireless commitment.”

Thierry Garnier joins Kingfisher to succeed Ms Laury in the role on September 25.

Chairman Andy Cosslett commented: “The Board and I would like to thank Véronique for her vision and her determination in laying the foundations for our future growth. She leaves with our best wishes.

“In Thierry Garnier, who joins Kingfisher next week, we have found the right individual with the right skills and experience to build on the platform that we are establishing. In the near term our focus will be on improving execution and delivering on our key priorities for the year. Thierry will bring a fresh perspective to the Group as we focus on delivering growth in shareholder value and creating a compelling experience for our customers and colleagues.”

Comments

22 September 2019 10:24:34
B&Q bob

No surprises from us on the shopfloor management paralysed by fear of jobs and to weak to take chances so bumble around. Ranges boring, and overpriced 

Stock loss due to theft astronomical, but told replacement security tags Expensive! Staff demoralised, staff turnover incredible, company doesn't care if you leave so an experience vacuum forming. Company is becoming a bully, cut the most experienced staffs wages by over 2.5k and lost the people who had made the company NO1 in the UK. While CEO and directors took massive pay packets. They deserve to lose their jobs. 


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