Kingfisher to exit Russia, Spain, Portugal as Q3 sales fall
European home improvement retailer Kingfisher on Wednesday said it was exiting Russia, Spain and Portugal to focus on markets where it could take a leading position as third quarter like-for-like sales fell 1.3%.
Third quarter total sales rose 1.2% to £3.04bn in constant currency, while like-for-like sales were down 1.3% reflecting continued weakness in its French Castorama business.
Kingfisher added that it was returning a further £50m via a share buyback.
The B&Q owner said it expected to grow gross margin after clearance in the UK, Poland and its Brico Dépôt unit France.
“However the outlook for Castorama France is more uncertain given difficult trading and the ongoing impact of recent national demonstrations,” the company said.
In the UK and Ireland like-for-like sales were down 0.7%, as B&Q UK & Ireland sales fell 2.8% to £850m. Screwfix revenue rose 10.6%, and 4.1% on a like-for-like basis to £442m with nine new outlets opening during the third quarter.
French fell sales 3.1% with sales for the home improvement market were flat during the period. Castorama sales fell 7.6% reflecting continued weak footfall and the impact of transformation-related activity.
Chief executive Véronique Laury said the company's transformation programme continued to make progress, but warned that the company was operating “in a difficult retail environment”.
“We face challenges and we are addressing them. Our main challenge is Castorama France and we shared our action plan to fix it at the half year,” she said.
“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.”
"We are committed to our plan and to building a strong business for the long-term. As part of this commitment, we have taken the decision to exit Russia, Spain and Portugal. This will allow us 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.”
Hargreaves Lansdown analyst Sophie Lund-Yates said the figures from Kingfisher were "disappointing...with group like-for-like sales declining faster than we saw at the half-year".
"The group has been grappling with headwinds in both the UK and French markets, so these results aren’t a huge surprise, but investors would still like Kingfisher to be painting a slightly brighter picture."
"Like all bricks and mortar retailers, Kingfisher’s facing a tough climate - it’s been taking a long hard look in the mirror and decided slimming down is the way forwards. The decision to exit Russia, Spain and Portugal is a big step in the group’s streamlining plans and should mean it can really focus on its core businesses in the UK and France," Lund-Yates said.
"Investors will be consoled to see margins moving in the right direction, even if they’ve crept rather than jumped up. The fact still remains though French and UK tills just aren’t ringing as often as they used to, and it’s going to take a lot more work to reverse the impact of that.”