Business review

Trading review - UK & Ireland

Sales £m 2009/10
£m
2008/09
£m
% Change (Reported) % Change (Constant) % LFL Change

UK & Ireland includes B&Q in the UK & Ireland and Screwfix. Prior year figures include the now ceased Trade Depot trial and have been restated to include Ireland.

All trading commentary below is in constant currencies.

UK & Ireland 4,442 4,379 1.4% 1.2% (0.1)%
 
Retail profit £m          
UK & Ireland 217 132 64.8% 64.5%  

Kingfisher UK & Ireland

Kingfisher UK & Ireland delivered total sales up 1.2% to £4.4 billion (-0.1% LFL) and retail profit up 64.5%, supported by strong sales, gross margin benefits and further cost initiatives. The total home improvement market* was relatively resilient, down around 0.3%, with better early spring weather and renewed consumer interest in the home and DIY helping offset the negative impacts of the recession. However, both the Trade and the Irish markets were challenging throughout the year. Kingfisher’s UK businesses in aggregate outperformed the market.

B&Q UK & Ireland’s total reported sales grew 2.6% (+1.3% LFL) to £4.0 billion. More favourable weather boosted sales of outdoor products, up around 6%, and kitchen, bathroom and bedroom sales were up around 7%, with improved merchandising, new ranges and competitor withdrawal helping drive market share at a time of weak consumer appetite for bigger ticket purchases. Sales of DIY and decorative products remained relatively resilient, down around only 2%, with less house moving activity offset by renewed consumer interest in DIY and low-cost room makeovers.

Retail profit grew 79.4% to £195 million. For the second year in a row gross margin percentage increased, up 110 basis points (2008/09: +60 basis points) despite the costs of clearing ‘top stocks’** across the store estate during Q3. Gross margins benefited from lower mark down activity, better sales of higher margin products, shrinkage reduction and supply chain cost efficiencies. A strong focus on operating cost efficiencies also continued, resulting in flat overall costs year on year despite 1% underlying cost inflation, 1% new store space and a higher level of staff bonus.

Following successful trials of a lower-cost large store revamp last year (around £1 million versus £2.5 million for a standard revamp), a further nine were completed during 2009/10 as well as eight medium format stores. In addition, 80 more limited revamps were completed which focus only on the main showroom categories (kitchen, bathroom and bedroom). B&Q UK & Ireland now has 119 large stores (66 in the modern format) and 211 medium stores (of which 185 have been modernised).

Trade

Screwfix limited the impact of a challenging trade market with total sales declining 4.3% to £471 million compared with the wider Trade market*** which we estimate to have declined around 15%. Initiatives that drove market share gains included the continued roll out of trade counters and the new ‘Plumbfix’ and ‘Electricfix’ specialist mail order catalogues. Nine trade counters were opened during the year, taking the total to 147. Almost 60% of total sales are now generated from these physical outlets. Retail profit was £22 million, down £8 million reflecting the sales decline and investment in new outlets.

During 2009/10 B&Q successfully trialled TradePoint, a new trade market offer exclusive to tradesmen. The new proposition takes the very best of B&Q (extended opening hours, convenient locations, heavy building ranges, showrooms and the rest of the stores’ retail products) and adds the best of Screwfix’s ranges and logistics expertise to create a merchant environment with extended trade brands and trade only prices, all exclusively for tradesmen. This offer is unique in the UK and is expected to boost Kingfisher’s low share in the professional trade market.

TradePoint is a 4,000 sq ft dedicated area within a B&Q store. It has its own separate entrance, exit and payment area, a trade only manager and a team of eight to meet the trademan’s needs. Access is restricted to TradePoint members who have been verified as genuine tradesmen. Trade customers choose from a catalogue of 12,000 specialist and trade branded products and place their order with staff at a manned counter. For those 8,000 items held in stock, the products are picked within seven minutes by TradePoint staff from a 3,000 sq ft warehouse behind the counter. For non-stocked items, overnight delivery is arranged. Trade customers can also shop the rest of the B&Q store with special catalogue pricing available to them on a large range of B&Q products.

TradePoint uses space made available by ongoing work at B&Q to merchandise its existing ranges in less space. In the trial stores around half of TradePoint customers are new to B&Q, space utilisation is improved and gross margins are higher than those achieved on the current trade offer. After staff costs, catalogue production costs and marketing the format generates an attractive incremental profit. The initial investment is expected to payback within two years.

National coverage in 118 large B&Q stores is expected by late summer 2010 from a capital investment of around £26 million plus net working capital of around £4 million. The impact of the roll out will be profit neutral in 2010/11.

  • * Market data from GfK for the UK leading retailers of home improvement products and services (including new space). However, this data excludes private retailers e.g. IKEA and smaller independents.
  • ** Stocks held at the top of in-store shelving
  • *** Based on the Builders’ Merchants Federation data for the 12 months to Jan 2010