Kingfisher announces 18% profit growth and 79 new stores

Kingfisher plc, one of Europe's main DIY chains, announced excellent half year results yesterday. In the February-July period, operational profits rose 18% to £473 million (almost 550 million euro), while global sales went up 3.8% to £5.662 billion (€6.6 billion). The figures do not include Hornbach and Koçtaş, two companies in which Kingfisher is an important shareholder.

Worldwide +20% profit growth spoiled by B&Q figures 

The group posted excellent or improving results around the world, but the huge majority of its profits and sales still come from the UK, Ireland and France – Kingfisher's core markets with subsidiaries like B&Q, Screwfix, Castorama and Brico Dépôt. The fastest growing operational profits were achieved by the International branch (+24.7% to £90 million or €104 million), just before Kingfisher France (+23.9% to €233 million), which has now become Kingfisher's biggest branch. The French branch passes the British, whose operational profits grew only 6.1% and stranded at £182 million (€211 million). 


The relatively small profit growth in the UK was, much like its sales figure, slowed down by competitor Focus DIY's stock clearance ahead of its closure. B&Q's profit grew 4.5%, while the other brand in Kingfisher's British branch, Screwfix, saw its profit more in line with the French and International branches: the tool and accessory supplier saw its profits go up 25.3% to £17 million (€20 million), profiting from an important sales growth (+7.7%) and improved distribution efficiency. 

Excellent results make CEO Cheshire happy 

Kingfisher's two main French brands, Castorama and Brico Dépôt, both grew significantly faster than the whole French DIY market (+4.2% and +7.1% compared to +2.8% for the whole market). Brico Dépôt Spain did even better (+11.4%), while Castorama Poland added 6.3% to its sales. Both Brico Dépôt Spain and Castorama Poland also saw significantly higher profits. B&Q China saw both its sales figure and its losses decrease. 


“We have delivered very strong profit growth in what are difficult times for all retailers. With around two thirds of our profit coming from outside the UK, these results clearly show the value of geographic spread and the benefits of operating our market leading international businesses in a more unified way”, as CEO Ian Cheshire stated. 

68 new stores in the UK, 1 in France, 10 in Eastern Europe

The group also announced its expansion intentions for the second half of 2011, including 68 new stores in the UK. 28 former Focus DIY stores are to open as new B&Q stores, while Screwfix will open 10 larger and 30 smaller stores on the British Isles. The 30 smaller stores (1200 m²) follow the pilot project of 13 smaller stores that opened earlier this year and were deemed very successful. 


Kingfisher France would see one new store, while the International branch is opening ten: four in Turkey, four in Poland and two in Russia, adding 17% to the available floor space in Eastern Europe. B&Q China is limiting itself to repositioning – and trying to reach the break-even point. “I am confident we will continue to outperform, benefiting from our well-established programme of self-help initiatives, international scale and breadth, and robust balance sheet”, as CEO Cheshire concluded confidently.

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Russian Metrika joins DIY group Bricoalliance

Russian DIY chain Metrika has joined international purchasing group Bricoalliance to see the Belgian based organisation spread further East. Bricoalliance's slow but steady expansion sees them enter the top league of European DIY chains, with (currently) 351 stores in 7 countries.

Saint-Petersburg group with experience and ambition

Metrika, a Russian group with its main focus on the Saint-Petersburg region, adds serious weight to the Bricoalliance basket: it counts on having a 400 million euro turnover and 55 stores at the end of this year. General manager Jeroen Lauwers is overjoyed: “this is a very strong group and an excellent addition for Bricoalliance, as Metrika is an independent retailer with a huge growth and impressive know-how”.


Metrika is special because it has an important assortment of private label products in addition to the A-brands. “This is an interesting strategy, and we certainly can learn a lot from Metrika's experience”, says Lauwers.

Expanding North and East

Bricoalliance, founded in Southern Europe in 2005 after Spanish Bricoking, Portuguese Mestre Maco and Italian Puntolegno joined forces, but its centre of gravity (and headquarters) shifted North when Belgian Hubo joined in 2006. The northbound expansion continued and the group had already conquered the Netherlands and Poland before entering the Estonian and Lithuanian market when Bauhof joined earlier this year. The Russian Metrika group now is the next step in that evolution.


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Home Depot victorious in American DIY battle

Home Depot, leader in the American DIY market, is slowly leaving Lowe's behind. For the second time in three months, the latter had to issue a profit warning while the former announced to expect higher profits. 

Lowe's low quarterly results

Lowe's results were below expectations in the second quarter of 2011. Turnover rose 1.3% to 10.1 billion euro, but on a like-for-like basis, sales went down 0.3%. Profits were marginally lower than one year ago, dropping from 579.3 to 578 million euro. 


The group had to close seven unprofitable shops and lowered its expectations for the whole financial year (ending on 3 February) from 4% to only 2%. The only growth the chain really expects comes through the internet, highlighted by the opening of the Spanish language version of their website just this week. Another source of hope for Lowe's is the redecoration of its stores.

Home Depot growth causes Lowe's demise

Lowe's's downfall is caused largely by Home Depot's fierce competition, according to analysts. The latter was larger than Lowe's for the ninth quarter in a row, rising 4.3% worldwide. Total turnover was 14 billion euro, rising 4.3% worldwide. Net profits rose too, from 829 to 847 million euro. Unlike its main competitor, Home Depot confirms its expected growth of 2.5%.


Both Home Depot and Lowe's complain about the low consumer confidence in the US, causing many Americans to cancel their renovation plans. However, Home Depot did profit from spring sales and the damage caused by tornadoes. 

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Focus DIY goes into administration

British DIY-retailer Focus went into administration yesterday, putting nearly 4000 jobs at risk. The chain currently has 178 stores throughout the UK, and analysts expect that they will work normally until administrators are officially appointed, probably at the end of next week. Last year, Focus made made a pre-tax loss of 24 million euro.


Reportedly owners Cerberus, who bought Focus for just £1 (€1.12) in 2007, have asked Ernst&Young to handle the administration process. Despite Cerberus's investments of probably around 220 million euro, Focus's debts have risen from 190 million to 260 million euro in those four years. Focus suffers mainly from the recession in the economy and falling consumer confidence, but also from tough competition from Wickes – the brand that, ironically, Focus owned until 2005.


A statement from Focus said yesterday: “Following notification of an event of default under the senior credit facility, and a realisation that there were no alternatives that could be explored any further, Focus directors have come to the conclusion that to protect the interests of creditors they have no choice but to seek protection through filing a notice of intention to appoint administrators.”


Several analysts wonder if it is private equity group Cerberus who caused Focus to fail, as their short time pressure might have endangered Focus's long term vision. Several DIY chains in the Benelux, like Brico and Praxis, are also private equity-owned. 

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