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Clas Ohlson To Close All UK And German Stores

Clas Ohlson Ealing exterior 725 x 500.jpg

In a six-month trading update, Clas Ohlson has confirmed its intention to close all stores in the UK and Germany.

Text from the update follows and the full release can be found here.

Quarter 2 - 1 August to 31 October 2018

● Sales increased by 8% to 2,157 MSEK (1,999), organic sales up 4% and up 1% in comparable units.

● Online initiative yields results — sales growth totalled 43%

● Operating profit, including non-recurring items and costs linked to CO100+ action programme, totalled 33 MSEK (125)

● Underlying operating profit amounted to 124 MSEK (140)

● Profit after tax totalled 25 MSEK (96)

● Earnings per share amounted to 0.40 SEK (1.52)

Six months – 1 May to 31 October 2018

● Sales increased by 9% to 4,115 MSEK (3,782), organic sales up 5% and up 2% in comparable units.

● Operating profit, including non-recurring items and costs linked to CO100+ action programme, totalled 65 MSEK (225)

● Underlying operating profit amounted to 186 MSEK (240)

● Profit after tax totalled 55 MSEK (173)

● Earnings per share amounted to 0.87 SEK (2.74)

Events after the end of the reporting period

● Sales in November increased by 10% to 979 MSEK (889).

● The Board has decided on a new direction for Clas Ohlson’s market presence that going forward will focus on online shopping. Consequently, the store network in the UK and Germany will be closed.

● As previously communicated, operating margin for the current and next full-year is estimated to be about 4-6%. For the full-year 2018/19 an additional non-recurring cost of maximum 210 MSEK will be reported for the closure of the store network outside the Nordics. A positive effect on earnings of 75 MSEK will arise when the retail network has been closed.

Lotta Lyrå, President and CEO of Clas Ohlson AB, commented: 

Increased focus on profitable growth in the Nordics and online. Closure of store network outside the Nordics
The market climate for retail remains challenging with a fast rate of change. Based on our solid financial position, we are following our plan of building on Clas Ohlson’s strengths and can proceed with our change work at a swift pace. A sign that we are on the right track is that organic growth is in line with our target of 5 per cent and online growth was a full 51 per cent for the first six months of the financial year. The gross margin also strengthened in the second quarter. This also shows that our aggressive commercial ventures have generated results, that optimising our product range is bearing fruit in terms of higher sales and that the profitability of our campaigns is improving. Underlying operating profit for the quarter amounted to 124 MSEK (140).

We strengthened our online shopping platform in the quarter by broadening the range and expanding digital capabilities and delivery capacity to customers’ homes. We are thus prepared to manage the increase we expect in the forthcoming Christmas shopping period and established an e-commerce platform for future growth. Our reinforced online capacity provides us with eight more online shopping days for Christmas compared with last year. These measures fall within the announced interval of 1-2 percentage points of the operating margin for strategic investments. Operating profit amounted to 33 MSEK (125). This level reflects the market climate, our high rate of change and that identified cost savings have not yet generated effects, which is according to plan.

New direction for Clas Ohlson’s market presence
The Nordic region is our home market and our operations in Sweden and Norway enjoy a uniquely strong position and have performed positively in terms of both growth and earnings. We see opportunities for further improving profitability in Finland. In light of the shift in the retail sector and in line with our previously announced strategy, the Board has decided on a completely new direction for our operations outside the Nordics. The aim is to establish a scalable business model that improves long-term profitable growth at a lower financial risk exposure.

After ten years, the business in the UK is continuing to incur significant losses despite measures in recent years to optimise the store network. The evaluation of the pilot of four stores in Germany has revealed that the operations will be unable to deliver on plan and therefore the right conditions are not in place to achieve profitability. Against this background, the store network in the UK and Germany will be discontinued and in line with the new direction our presence in these markets will be concentrated to online shopping. This direction will allow us to develop a scalable business model for the UK and Germany initially, and then later in other markets.

The Board's decision on a new direction for Clas Ohlson’s market presence and to close the store network outside the Nordic region will have a positive effect on operating profit of approximately 75 MSEK per year when the closure has been completed. The closure of the store network in the UK and Germany will affect approximately 150 employees and the total settlement cost is estimated at maximum 210 MSEK. The planning of the closures of the relevant stores will be made following careful consideration of the lease terms for each store so as to optimise total discontinuation costs. The estimated discontinuation costs will be reported in the nine-month report.

Source : Clas Ohlson

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06 December 2018

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