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Retail Viewpoint – Kingfisher

A tale of two subsidiaries.

While overall UK sales increased to £1,274m, the dichotomous results at Kingfisher UK continue with B&Q sales down 2.8% to £875m amid continued disruption from the ‘ONE Kingfisher’ transformation plan. Meanwhile, Screwfix continued to record impressive double-digit growth, increasing 16.6% on last year to bring total sales to £399m, and logged equally impressive LFL sales growth of 10.2%.

This poor B&Q performance was anticipated by CEO Véronique Laury, reflecting B&Q’s store rationalisation programme not yet annualising out and product clearances to reduce SKUs. Furthermore, a 1.9% decline in B&Q’s LFL sales is underwhelming, even amid a challenging DIY market, and particularly compared to a 2.4% increase at competitor Wickes for the three months to September 2017. Further disruption is anticipated from the ONE Kingfisher programme, but these steps to simplify its range and drive online are necessary to compete in an increasingly multichannel sector.

On the other hand, Screwfix continues to grow at a tremendous pace, driven by its strong digital capability (building on the 47% increase in click & collect in H1 2017/18) and extended specialist ranges. In addition, growth in store numbers (up 12 stores for 545 total across the UK and Ireland) demonstrates an appropriate response to convenience as a key driver for store choice.

Investors and senior management alike will be concerned by what is yet another unattractive update on the road to achieving Laury’s ‘ONE’ vision. In light of these results, Screwfix now represents over 30% of total UK sales for Kingfisher, as opposed to 23% two years ago. Given Screwfix’s buoyancy, speculation that Kingfisher might sell its fastest growing subsidiary for a quick profit could intensify, in a bid to further support B&Q’s transformation.

Source: GlobalData, 21 Nov 2017

November 2017

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