France Operating review

Two complementary businesses

Kingfisher is the market leader in France with its two complementary store formats, Castorama and Brico Dépôt. Kingfisher’s total sales in France grew 7.2% in the year with retail profit up 13.2%.

In France, Kingfisher’s total sales grew 7.2% (LFL +2.6%). Eight new stores were opened in the year and six were revamped, adding around 4% new space. Banque de France data shows that growth in comparable DIY store sales* was 3.0% for the full year. Kingfisher’s businesses outperformed the market by delivering comparable stores sales growth of 3.7% (on the same basis as Banque de France), despite disruption from store revamps.

Retail profit grew 13.2% to £237 million with both businesses delivering good profit growth. Gross margins were up 90 basis points due to higher own-brand sales penetration, a 25% increase in direct sourcing and an improved sales mix across both businesses. With a high level of freehold stores and strong cost control, Kingfisher’s net cost inflation in France continues to run at around 2%. This is expected to increase to around 3% for 2008/09.

Castorama total reported sales grew 4.1% to £1.7 billion (+3.7% LFL, +5.6% on a comparable store basis), driven by good performances of new paint, decorative and bathroom ranges. The sales participation of exclusive own-brand products continued to grow with sales of the decorative ‘Colours’ ranges almost doubling compared to the prior year.

Castorama continued its store modernisation programme, with six stores revamped during the year. Forty-two per cent of total selling space is now in the new format and these stores continue to outperform, with average sales densities 19% higher than older format stores.

Brico Dépôt total reported sales increased 11.1% to £1.5 billion. LFL sales growth was +1.4% after around 2% of internal cannibalisation resulting from the decision to open new stores in catchments where existing stores are trading at full capacity. Sales were strong in building and decorative categories, supported by favourable weather and new ranges of power tools and indoor paint.

Eight new stores opened in the year taking the total to 89, including the opening of three stores transferred from Castorama at the end of last year.

The new SAP information technology platform was implemented to support Brico Dépôt’s future growth. Since completion of the project stock availability and stock quality have improved.