- French Castorama business simplified
- Flat like-for-like revenues in Q1
Kingfisher (KGF), the DIY chain that owns the B&Q and Screwfix businesses, reported broadly flat revenues at constant currencies in a first quarter (Q1) trading update. Thierry Garnier, group chief executive, explained that the group had benefited from “continued resilience in our core categories, although 'big-ticket' sales have been weak, reflecting the broader market as expected”.
He added that Kingfisher’s “trade proposition continues to resonate with customers”, with like-for-like (LFL) sales at the TradePoint business up by 8.5 per cent. Clearly, some parts of the group are faring better than others, and logic dictates that trade sales volumes find support from unavoidable areas of household maintenance. But a general industry malaise is weighing on performance.
The group has simplified the structure of its Castorama business in France, conducted refits at some of the underperforming branches, and set up a new management team. There is an intensified focus on cost savings and optimising inventories. Castorama also now benefits from an e-commerce marketplace, and a trade loyalty programme is currently being trialled. But LFL sales still pulled back by 5 per cent in Q1 with “market weakness reflected broadly across all categories”. Sales volumes across the group’s other markets in mainland Europe – Poland, Iberia and Romania – provide encouragement, but the squeeze on household discretionary budgets is the overriding feature of the market.
Sales trends have continued into the second quarter, with group LFL sales down by 2.5 per cent for the three weeks to 18 May 2024. The good news is that Kingfisher continues to attract new trade customers, and the e-commerce offering is showing genuine promise. Hopes are high that interest rates across Europe have peaked and that any retracement in borrowing costs would act as a catalyst for sales, although as Garnier recently pointed out, there is an inherent lag between housing demand and increased home improvement volumes.
Last IC view: Sell, 234p, 25 Mar 2024
