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Interim results for the 26 weeks ended 31 July 2010

 

16 September 2010

 

Trading Review – UK & IRELAND

Sales £m 2010/11 2009/10 % Change (Reported) % Change (Constant) % LFL Change
UK & Ireland 2,328 2,401 (3.0)% (2.9)% (3.7)%
Retail profit £m 2010/11 2009/10 % Change (Reported) % Change (Constant)  
UK & Ireland 171 148 15.7% 15.8%  

UK & Ireland includes B&Q in the UK & Ireland and Screwfix.
2010/11: £1 = 1.16 euro (2009/10: £1 = 1.12 euro)
*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.

All trading commentary below is in constant currencies.

Kingfisher UK & Ireland

Total sales were down 2.9% to £2,328 million (-3.7% LFL) in a declining home improvement market* affected by weak consumer demand for bigger ticket home project spending.

However, retail profit was up 15.8% reflecting self-help initiatives to drive higher gross margins and lower operating costs. Profit also benefited from the tactical decision in Q2 to limit the use of general, store wide promotions. This approach, whilst impacting LFL sales growth, resulted in a higher gross profit year on year.

B&Q UK & Ireland’s total sales were down 3.1% (-3.7% LFL) to £2,095 million. Sales of outdoor products declined around 1% despite mixed weather and following strong growth last year (+7%). Sales of decorative products were down around 2% but sales of Showroom (kitchens, bathrooms and bedrooms) and Building categories were down around 6%, reflecting fewer promotions and weak consumer appetite for bigger ticket purchases. As anticipated, building sales were also impacted by the roll out of ‘TradePoint’ into B&Q’s large format stores.

Retail profit grew 15.4% to £158 million with gross margin percentage increasing sharply by 140 basis points (2009/10: +110 basis points) driven by more direct sourcing, further shrinkage reduction and fewer promotions. A strong focus on operating cost efficiencies also continued with costs reduced in line with sales.

The roll out of the new B&Q TradePoint offer within large stores announced with the preliminary results in March 2010 was completed on time and to budget. There are now 118 B&Q large stores with a TradePoint offer and national advertising has now commenced for the first time.

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

In the original four trial stores, annualised trade sales now account for 13% of total store sales, up from around 9% previously and are expected to increase as the offer becomes better known and trusted by trade professionals. Over 250,000 customers have registered as TradePoint customers, significantly more than were registered with the previous B&Q Trade Discount Card.

Following the successful national roll out to B&Q large stores an ‘order & collect’ TradePoint offer will be trialled in H2 in B&Q medium stores. This format will be based on next day delivery from an in-store order point whilst giving immediate access to trade prices on most of the rest of the stores’ retail products.

Screwfix limited the impact of a challenging smaller tradesman market with total sales declining 1.4% to £233 million. Initiatives that drove sales in a tough market included new ranges and the addition of 91 specialist trade desks exclusive to plumbers and electricians within existing Screwfix outlets. Three new outlets were opened during H1, taking the total to 150 and now accounting for around 60% of total sales. Retail profit was £13 million, up 21.7% reflecting distribution efficiencies and tight cost control.