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Kingfisher Notes Weak Performance In France

Castorama Bordeaux Merignac 725 x 500

Kingfisher plc is today providing its Q3 23/24 sales.

For UK performance, click here.

Key points

  • Q3 sales of £3.2bn; total sales -2.1% (reported) and -2.7% (constant currency)

  • LFL -3.9% including a -0.4% calendar impact(1) with overall volumes continuing to show an improving trend

  • Underlying retail and trade consumer trends resilient in the UK and improving in Poland, in line with our expectations; market trends in France weaker than expected

  • Q3 by region:
    • UK & Ireland: market share gains at B&Q (including TradePoint) and Screwfix with resilient underlying sales trends

    • France: Castorama performing in line with the market; underperformance at Brico Dépôt due to significantly higher weighting of building materials (including insulation) and electricals, plumbing, heating & cooling (EPHC) products (which have seen a delayed start due to the warmer weather, against strong prior year comparatives)

    • Poland: improvement in sales trend since H1; market share remains up significantly on a two-year basis

  • Opened four Screwfix stores in France in Q3 (13 in total); Screwfix online launched in six new European markets

  • Total e-commerce sales growth of +7.4%, supported by continued strong growth of B&Q’s marketplace (reaching 35% of B&Q’s e-commerce sales(2) in October)

  • Full year adjusted PBT guidance lowered to c.£560m(3) to reflect continuation of Q3 trends in Q4, including continued resilience in the UK and market weakness in France; now expect full year free cash flow of c.£470m

  • Launched first tranche of new £300m share buyback programme, with c.£26m completed to date  

FRANCE

Total sales -8.5% (LFL -8.6%), with trading in France impacted by a weak market backdrop affecting both consumers and trade. Similar to the UK, unseasonably warm weather in September and early October led to a slower start of insulation, plumbing and heating sales, and the businesses faced strong comparatives from Q3 last year (when consumers anticipated energy price increases and risks of power shortages, driving strong sales of heating and energy efficiency products). 

  • Castorama sales -6.7%. LFL -6.7%, with performance in line with the market. Market weakness in France was reflected broadly across the categories, while electricals, plumbing, heating & cooling (EPHC) lapped strong sales of heating and energy efficiency products in the prior year, with performance improving towards the end of the quarter.

  • Brico Dépôt sales -10.4%. LFL -10.6%, a weaker performance relative to Castorama due to the impact of unseasonably warm weather, with the business exposed to a significantly higher weighting of building materials (including insulation) and autumn and winter season products. Sales were also impacted by exceptionally high sales of insulation, heating propellants and generators in the prior year. Since the correction to marketing budget allocation in mid-July, the business has seen an incremental progression of in-store traffic.

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Trading in France – Castorama in line with market, Brico Dépôt mix effect, cost actions being taken  

As set out in our H1 23/24 results, Q3 in France started with a slight slowdown in the sales trend relative to Q2 (August LFL was -5.3% compared to the Q2 LFL of -3.5%). However, the French home improvement market deteriorated far more than expected in September with Banque de France sales data down 9.1%. Although the market and trading trends have improved in October (and in Q4/November to date) compared to September, we have assumed that the French market will remain at least as weak as October throughout Q4.  

As a result of the subdued environment in France this year, we have been proactively managing our operating costs to align as far as possible to trading conditions. The business has strengthened actions on flexing staffing levels, lowered discretionary spend and has accelerated several structural cost reduction initiatives in H2. These actions will also support improved profitability in France over the medium-term.   

However, at the assumed level of market weakness in Q4, the cost efficiencies described above and being achieved by the business are not sufficient to offset the bottom-line impact between now and the end of the financial year.

OTHER INTERNATIONAL

  • Poland sales -7.5%. LFL -9.0%, with performance improving from H1 as consumer confidence, while still negative, continued to recover. Sales trends improved across most categories, apart from EPHC where performance was impacted by a comparative period of high demand in products such as heating propellants, as consumers anticipated energy price increases. On a two-year basis, Castorama gained market share in the quarter (to 30 September, as measured byGfK). Following the one new store opening in H1, Castorama opened one new medium-box store in Q3 and intends to open three further stores in Q4, in line with its target of five store openings in this financial year.
  • Iberia sales -3.9%. LFL -3.9%, with good performance seen in the building & joinery, kitchen and bathroom & storage categories. Unfavourable weather impacted sales of seasonal categories.

  • Romania sales -5.8%. LFL -3.0%, reflecting a resilient performance against strong prior year comparatives (+4.2%). Positive YoY growth was achieved in EPHC, bathroom & storage and outdoor categories.

  • Other consists of the consolidated results of Screwfix International, NeedHelp and franchise agreements. While these businesses are in their early investment phase, we continue to be encouraged by the results we have seen to date. With four new openings in the quarter, there are now 13 Screwfix stores in operation in France. Following the early positive results in France, we launched Screwfix as a pure-play online retailer (under the domain name Screwfix.eu) in six new European countries (Poland, Spain, Belgium, the Netherlands, Sweden and Austria), leveraging Screwfix’s distribution centre in France for fulfilment.

Thierry Garnier, Chief Executive Officer, said:  

“Our UK banners performed well in Q3, with B&Q, TradePoint and Screwfix growing sales and market share. In France, our performance was impacted by a weak retail market, as well as a delayed start to insulation, plumbing and heating sales – to which Brico Dépôt is more heavily weighted – due to unusually warm autumn weather, and strong prior year comparatives in these categories. In Poland we are seeing early signs of recovery in the trading trend, against an incrementally more positive consumer and economic backdrop. Reflecting the weakness of the French market, and notwithstanding our proactive cost actions, we have lowered our Group profit guidance for the full year.  

“We continue to focus on our execution and driving our strategy forward. Our online marketplaces are growing rapidly, with B&Q’s marketplace reaching 35% of its e-commerce sales in October. Screwfix has continued its international expansion, by launching as a pure-play online retailer in six new European countries, and opening four new stores in France in the quarter. We also continue to harness AI and data to support sales, profit and cash, including by growing our retail media proposition across the Group.  

“As we move into 2024, we are focused on what is in our control. First, a continued focus on growing market share in the UK, France and Poland with delivery of our strategic growth initiatives. Second, driving productivity gains to offset wage inflation. And finally, delivering on our free cash flow and shareholder returns targets. We expect to see some product cost price inflation, albeit at a significantly lower level, and expect rational retail pricing and competitive price indices at all our banners.  

“On the medium-to-longer term outlook, we remain very positive for home improvement growth in our markets, and our ability to grow ahead of our markets.” 

Source : Kingfisher PLC

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22 November 2023

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