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B&Q sales drop, while Screwfix flourishes in Q1

Published: 28 May 2015
Kingfisher's latest results reveal a 1.5% decline at B&Q in the UK & Ireland, as Screwfix posts an increase of 26.8% for the quarter, boosted by new openings.
B&Q sales drop, while Screwfix flourishes in Q1
The trading statement for the 13 weeks ended May 1, 2015, reported that sales for retail operations in the UK and Ireland were up 1.6% on a like-for-like (LFL) basis against strong comparatives of +10.1% for the same period last year.

Screwfix, once again, was the star of the show, boasting a 26.8% rise in total sales, up 15.4% LFL. Parent firm Kingfisher attributed the strong performance to Screwfix's omni-channel capabilities, new and extended trade ranges and the opening of six new outlets during the quarter.

B&Q UK & Ireland's total sales were down 1.5%, with a 1.1% LFL decline during the period. Sales of outdoor seasonal and building products had an impact on B&Q's performance, with trading down 4%, while sales of showroom products also saw a decline, down 7% reflecting reduced promotional activity and the move to 'Every Day Great Value', said the company. Sales of indoor products, excluding showroom, were up 2%.

Plans to downsize the chain continued, with contracts exchanged to dispose of leases on 14 stores to two national retailers over the next two years. The stores form part of the previously-announced 60 B&Q store closures.

The UK businesses managed to claw back some margin this year, with UK gross margins up 90 basis points in the quarter, against weak comparatives of -210 basis points Q1 2014/15, due to more promotionally-led showroom sales last year.

In France Kingfisher posted a total sales increase of 0.4%, down 1.2% LFL, reflecting what it describes as a soft market. The Castorama chain saw sales decline 0.6% on a total and LFL basis. Kingfisher stated that this performance was in line with market expectations, as according to Banque de France data, sales for the home improvement market were down around 1% in Q1. Meanwhile, Brico Dépôt reported an increase of 1.6%, down 1.9% LFL, impacted by the continued slowing of the house building market.

Kingfisher's performance in its other international businesses, which include newer markets Russia and Poland, was positive, with total sales up 7.8% and a LFL increase of 3.8%. Sales in Poland were broadly flat, up 0.4% LFL but against strong comparatives of nearly 12% LFL the previous year. Gross margins were also up 20 basis points and costs were tightly controlled. Russia saw impressive growth, with total sales up 38.9% and +31.3% LFL, reflecting strong consumer spending on durable goods in an uncertain market, said Kingfisher.

Kingfisher chief executive officer Véronique Laury said: "We have made a solid start to the year against strong comparatives. In the UK, B&Q continued to grow sales volumes and Screwfix delivered an excellent performance, opening its 400th store in May. In France, our businesses performed broadly in line with the market.

"We are also making good early progress with our 'ONE' Kingfisher plan to unlock our potential by creating a single, unified company where customer needs come first. Our first 'sharp' decisions are being worked on at pace... We are also pleased to report that we already have agreements to dispose of a quarter of the B&Q stores earmarked for closure. We look forward to sharing more of our plans as the year progresses."

Finspreads senior analyst Fiona Cincotta commented on the results today: "The eye-catching part of the release is France, long the weakest point of Kingfisher's European retail business, but it has not declined any further. This suggests the self-help measures instigated by CEO Veronique Laury-Deroubaix--a key manager in the region before stepping up to the top job in December--are gaining traction. France total sales are up, with Brico Depot leading in the quarter by an emphatic 1.6% like-for-like rise, whilst the rate at Castorama was steady at -0.6% Q/Q.

"I'm curious about the UK picture. Gross margins probably touched a 1 percentage point advance during the quarter, but B&Q UK and Ireland slipped faster by 1.5% vs. 1.1% and the wholesale/retail hybrid Screwfix roared on with a 15.4% LFL. This suggests to me the presence of discounting in the consumer business and my next question on that would concern what Kingfisher's further promotion plans are, and perhaps in which business they'll be deployed. Overall a somewhat surprisingly solid job by Kingfisher in Q1."

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