After a positive start to the year with overall LFL ( Like-for-Like) sales in the 23 weeks to July 12 2014 up 2.3% and UK & Ireland sales up 4.7% the situation and future of Kingfisher was near enough cemented.
However, in the 10 weeks to July 12 2014 negative LFL sales has spread to all markets even the UK down 1.3%, China, Poland, Romania, Russia, Spain, Portugal, Germany and Turkey (Koçtaş JV) also suffered a 1.8% decline and France’s sales worsened by 2.2%.
Some of the causes are clear with French New housing starts and planning consent data for the three months to May 2014 down 20% and 16% respectively, according to the Ministry of Housing. The situation in France continues to look bleak for the foreseeable future. A similar story is also happening in China where new property transaction sales were down 18% for the three months to June 2014 for 17 cities in which B&Q China operates, according to the China Real Estate Exchange.
Whilst other retailers like UK Home Retail Group are quick to talk about their burgeoning click and collect business Kingfisher has gone quiet on its Screwfix business which in 2013/14 had LFL’s of over 12%. Is it likely that with the housing starts lowering across its main markets and the convenience of Amazon across Europe and the growth of DIY ranges in Hypermarkets that Kingfisher needs to go back to basics before indulging on buying lots of bricks in an increasingly digital world.
Kingfisher is determined to pursue its merger with Mr Bricolage which it announced in April and hopes to complete the deal by February next year. This is despite the obvious pressure this will place on other parts of the business. The combination of poor sales growth alongside the need to find synergies in the merger will create a “cost reduction” environment at the customer for the next 18 months or longer.
Therefore suppliers will have to look at exclusive SKU’s for Mr Bricolage, Castorama and Brico Depot. Additionally best practice will be shared across all the banners so reducing shipping costs through potentially harmonizing the supply chain will help Kingfisher as it moves towards to driving down its cost base in the current period of economic decline.