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How B&Q and Screwfix owner Kingfisher is planning for a future of faster and more convenient commerce

Image courtesy of B&Q

B&Q and Screwfix owner Kingfisher is planning for a future in which its customers continue to work from home, shop with it online – and especially via mobile – and through smaller stores. Today the company reports record revenues and profits, and says it has stepped up investment in areas from digital to Screwfix as it plans for future growth.

The DIY and trade equipment retail group believes that shoppers will continue to want speed and convenience and that will “continue to drive the shift online in our industry, as well as the need for a wider network of smaller and more localised stores,” as it says in today’s statement. “In response we continue to increase our overall store count, while reducing the average size of our stores.” That also means a strong focus on mobile-first digital commerce, and on fast delivery.

Kingfisher suggests that more people will spend more time working from home than before the pandemic, making them more likely to spend on their homes and gardens.

The update came as Kingfisher reported full-year sales, with group sales came in at £13.2bn in the year to January 31 2022. That’s 6.8% up from the £12.3bn it reported a year earlier. Ecommerce sales grew by 5.3% on the previous year – and are 171% ahead of the year before that. Omnichannel engagement, it says, remains high and mobile is its fastest growing (+11.2 YOY, +301% 2YOY) and largest online channel, accounting for 54% of ecommerce sales.

In the UK and Ireland alone, total sales grew by 13.3% – and 11.8% LFL – over the full year, having grown by 65% LFL in the first quarter – a year on from the pre-pandemic situation – and 3.8% in the second quarter before declining in both the third (-3.5%) and fourth (-2.9%) quarters, compared with lockdown and furlough trading in the previous year.

Pre-tax profits of £1bn after a one-off credit of £58m, were 33.1% up from £756m a year earlier. In the UK and Ireland, retail profit grew by 16.7% to £794m.

Kingfisher chief executive Thierry Garnier says the group saw growth across its businesses, with “resilient” demand both from DIY and trade/do it for me customers. The two segments each account for half of group sales.

Garnier says: “We continue to leverage our stores’ assets and group technology to drive forward our ecommerce proposition, with faster click and collect and home delivery and broader product choices for our customers. 18% of sales are now made online, which is ten percentage points higher than two years ago. B&Q had an outstanding year, with sales passing £4bn. It was also a record year of expansion for Screwfix, with 70 new stores opened in the UK & Ireland and Screwfix France showing very promising early progress.”

B&Q: focus on smaller stores and digital

B&Q sales reached £4.2bn in the full year, up by 12.7% in total compared to the previous year, while like-for-like (LFL) sales, that strip out the effect of store openings and closures, were up by 12.3% and by 26.9% on the previous year. LFL sales were up 81.9% year-on-year in the first quarter of the latest year – when the prior year comparison was with before the pandemic – and subsequently declining in the second (-1.2%), third (5.6%) and fourth (-2%) quarters.

Online sales grew by 13% on the previous year and 146% on the previous year, and represented 11% of total sales. During the year B&Q opened 11 new stores, including five compact format stores, and six store-in-stores at Asda as Kingfisher trials using smaller formats to grow market share in urban areas. Such partnerships, believes Kingfisher, will help it both to win new customers and to generate incremental sales.

In-store it is also continuing a rightsizing strategy following trials. In one case, at B&Q Canterbury, rightsizing reduced costs by 33% but maintained similar levels of sales. About 40 ‘big box’ stores are now expected to be right sized in the next 10 years, with some spare space to be reallocated to online and dark store operations.

B&Q is also trialling Scan and Go, and has introduced self-checkout in 110 stores. An online paint mixing service now sits alongside 3D online design of kitchens, bathrooms and now storage furniture. It has also relaunched its TradePoint business with a focus on loyalty and online service. Following the end of the year it launched a marketplace on its website, with the ultimate ambition of trebling the range it sells online.

Screwfix: focus on mobile, small stores and fast delivery

Screwfix UK and Ireland sales reached £2.3bn, 14.3% more than the previous year, and 10.9% higher LFL, having grown through the first (+39% LFL), second (+15.9%) and third (0.2%) quarters before declining in the fourth (-4.2%). Ecommerce sales declined by 2% in comparison with “exceptional digital only trading periods in the prior year”, but were 161% up on two years earlier. Some 67% of total sales took place online in the latest year. That’s down from 78% in the previous year but around double the 33% of sales that were online two years earlier.

Mobile remained the largest channel for online orders in a year in which Screwfix launched its one hour Sprint delivery service – although it says that average delivery times are currently running at 45 minutes. Its mobile app has been upgraded with improved search and geolocation to aid in-store pick-up as well as Sprint integration – and subsequently downloaded more than 2m times. The retailer has also trialled a collect-format store at London Victoria and will now use its learnings to open more in an XSR format that takes the core Screwfix range into smaller format stores. It opened five of these in the second half of last year and now plans to open more.

By the end of the year it had opened 68 new shops to take it to 790 in the UK and Ireland (+12 to 24), and is targeting more than 1,000 in the medium term. Screwfix has also launched in France online-only and plans to open shops in the first half of its current financial year.

Russia-Ukraine war

The retail group says it has been shocked by the events in Ukraine, and is working with aid agencies both from a group perspective and locally in Romania and Poland, where its local businesses are raising money and donating products and time to help refugees. It has no direct exposure to Russia but has decided to stop selling any products that it previously sourced from Russian and Belarusian suppliers, and is working with suppliers to ensure no materials or components are sourced from either country.

Supply chain issues

Kingfisher says it has been able to manage its supply chain and logistics needs effectively, working with suppliers and logistics providers while improving its forecasting and placing orders well ahead of peak trading periods and events such as the Chinese New Year. It says it has managed shipping container costs and availability successfully, while navigating shortages of HGV drivers.

“For the year ahead, while the macroeconomic and geopolitical environment is uncertain, you can expect from us continued focus on top line delivery and market share growth, strong execution, effective management of our gross margin, and active and responsive management of our operating costs,” says Kingfisher’s Garnier.

B&Q and Screwfix are both Top50 retailers in RXUK Top500 research.

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