Kingfisher PLC (LON:KGF) said it plans to exit Russia, Spain and Portugal to focus on its core markets in the UK and France as a tough retail market hit third-quarter like-for-like sales.
Chief executive Veronique Laury said the move would allow the owner of DIY stores B&Q and Screwfix to “apply our strategy with more focus and efficiency in our main markets where we have or can reach, a market leading position and create good homes by making home improvement accessible for everyone”.
The company is in the second year of its five-year transformation plan, called “One Kingfisher”, and Laury admits the restructuring has been hard to carry out as bricks and mortar retailers struggle against online competition and weak consumer confidence.
"Transformation on this scale is tough, and we are operating in a difficult retail environment. We face challenges and we are addressing them,” she said, adding that the main challenge has been addressing sluggish sales of its French DIY store Castorama.
"Our action plan is now implemented for this year. We have accelerated our move to an everyday low price strategy and have launched a new marketing campaign to make it visible to our customers, however, there is no quick fix.”
Like-for-like sales drop in third quarter
The strategy update was made as the group posted sales of £3.0bn for the quarter to October 31, up 0.2% at actual foreign exchange rates or up 1.2% at constant currency, but down 1.3% on a like-for-like basis.
The UK & Ireland division grew sales by 1.4% to £1.3bn at actual exchange rates and constant currency but like-for-like sales dipped 0.7% as a 2.9% decline at B&Q offset a 4.1% increase at Screwfix.
READ: B&Q owner Kingfisher dragged down by French business once again in first half
The group’s French DIY store Castorama remained its weakest performer with like-for-like sales falling by 7.3%.
Brico Dépôt, the company’s other French home improvement store, delivered a 1.1% gain in like-for-like sales but it was not enough to mitigate the poor performance at Castorama with total reported sales in the nation down 3.9% to £1.1bn. At constant currency, total France sales were 3.1% lower, while like-for-like edged down 3.4%.
Other international stores generated sales of £640mln, a 5.4% increase on a reported basis or an 8.7% rise at constant currency with like-for-like sales up 1.6%.
Margins improving
The company improved its gross margin by 40 basis points after clearance sales in the quarter.
For the 2018/19 financial year, Kingfisher expects to grow the margin after clearance in the UK, Poland and Brico Dépôt France but warned that the outlook for Castorama France is “more uncertain given difficult trading and the ongoing impact of recent national demonstrations over rising fuel prices.
It also expects to complete the final £50mln tranch of its £600mln capital return commitment for the next three years via a share buyback, returning £140mln by the end of the year.