Q3 Trading UpdateSource: RNS
This announcement contains inside information
Wednesday 20 November 2019: Q3 trading update to 31 October 2019
Sales of £3.0 billion, down 3.2% in constant currency; LFL(1) down 3.7%
· Q3 total sales down 3.2% in constant currency.
· LFL down 3.7% reflecting continuing disruption from new range implementations, lower promotional activity and ongoing operational challenges in France, and softer market conditions in our main markets.
· As highlighted at half year results, initiatives to improve performance sustainably at Castorama France underway with key focus on IT effectiveness and supply chain efficiency.
· Continue to expect full year Group gross margin % after clearance to be flat(3).
Thierry Garnier, Chief Executive Officer, said:
"In my first eight weeks at Kingfisher I have immersed myself in our operations, listened to colleagues, visited stores and met with our customers and suppliers. I am proud to be leading a Group with strong assets, excellent market positions, differentiated business models and strong brands. I have also been encouraged by the commitment of our colleagues, and by proof of product innovation.
"However, it is clear that there is much to do to improve our performance. Kingfisher's trading during Q3 was disappointing. My early assessment is that we have not found the right balance between getting the benefits of Group scale and staying close to local markets. We are suffering from organisational complexity, and we are trying to do too much at once with multiple large-scale initiatives running in parallel. Altogether, this has brought disruption to sales and has distracted the business from focusing on customers. In addition, we faced softer market conditions in our main markets during the period.
"I am pleased to have strengthened my executive team with the appointment of three outstanding leaders: Bernard Bot, a seasoned CFO with a strong background in supply chain and digital, Alain Rabec, a highly experienced retailer as our new CEO of France, and John Wartig, formerly our interim CFO, as our Chief Transformation and Development Officer. Further appointments are in progress.
"As a team, our priority is to fix our operational issues - particularly in IT and supply chain in France - and refocus our efforts. This includes stopping or pausing a number of initiatives to concentrate on stabilising performance and trading. The effect of these changes will not be immediate.
"In parallel, we are building a longer term plan to refocus on our customers, simplify our model, embrace digital and return our business to growth. I look forward to providing an update on the business and our strategic priorities in March, within our full year results."
Q3 trading highlights by division (in constant currencies):
UK & IRELAND
Total sales +0.4% (LFL -1.0%).
· B&Q UK & Ireland sales -3.5%. LFL -3.4% against a softer market backdrop and c.-1.5% impact from the discontinuation of showroom installation services. Sales continue to be impacted by the implementation of the new surfaces & décor and kitchens ranges. LFL sales of weather-related categories up 1.0%. LFL sales of non-weather-related categories, including showroom, down 4.5%.
· Screwfix sales +7.9%. LFL +3.7% with seven new outlets opened during Q3. The business continued to strengthen its overall customer proposition, including ongoing price investment. On track to open first Screwfix outlet in the Republic of Ireland in Q4.
Total sales -6.2% (LFL -6.1%).
· Castorama sales -6.0%. LFL -6.0% reflecting lower promotional activity and the impact of transformation-related activity. LFL sales of weather-related categories down 10.2%, with milder weather impacting heating sales. LFL sales of non-weather-related categories, including showroom, down 5.2%.
· Brico Dépôt sales -6.4%. LFL -6.1% driven by c.-3% impact from reduction in promotional activity ("arrivages"), and milder weather.
· Total sales in Poland -0.8%. LFL -3.2% impacted by the implementation of new ranges and the removal of one further Sunday of trading each month(4). In addition, a softer market backdrop during the period impacted LFL sales by c.2%. LFL sales of weather-related categories down 2.3%. LFL sales of non-weather-related categories, including showroom, down 3.6%.
· Total sales in Romania -0.6%. LFL +6.1% driven by good sales performance of Brico Dépôt stores. Total sales impacted by annualisation of clearance impacts at former Praktiker stores.
FY 19/20 technical guidance
· Sales outlook:
o UK - expect continuation of softer market backdrop and range disruption
o France - expect Castorama to continue to underperform the home improvement market; ongoing impact from reduction in promotional activity at Brico Dépôt
o Poland - continued impact from Sunday trading restrictions (three non-trading Sundays from January 2019, previously two; four non-trading Sundays from January 2020); softer overall market outlook
· Continue to expect full year Group gross margin % after clearance to be flat(3)
· Transformation P&L costs in FY 19/20 expected to be c.£40-45m (previously £50-60m)
· Transformation exceptional costs in FY 19/20 expected to be minimal (previously up to c.£40m)
· Tax: Kingfisher has concluded a final settlement with the French Tax Authority (FTA) regarding the treatment of interest paid since FY 09/10. A contingent liability for €101m (£92m) was disclosed in Kingfisher's FY 19/20 interim condensed financial statements with respect to this matter related to the periods FY 09/10 to FY 11/12. At the end of Q3 19/20, Kingfisher was given the opportunity by the FTA to settle for all periods under review (FY 09/10 to FY 18/19). Subsequently, discussions have been held with the FTA to reach a comprehensive settlement. The P&L and cash impacts of the settlement are c.€90m (c.£80m) and will be paid, and recorded as an exceptional charge, in FY 19/20
(1) Like-for-like sales growth representing the constant currency, year on year sales growth for stores that have been open for more than a year.
(2) Brico Depôt Spain & Portugal.
(3) Gross margin % movement excluding Russia and Iberia.
(4) Removal of one further Sunday of trading each month had an estimated adverse impact on Poland LFL sales in Q3 of c.1%.
+44 (0) 20 7644 1082
+44 (0) 20 7644 1030
+44 (0) 20 7420 3184
This announcement and data tables for Q3 sales FY 19/20 can be downloaded from www.kingfisher.com. We can be followed on Twitter @kingfisherplc with the Q3 results tag #KGFQ3.
Kingfisher American Depository Receipts are traded in the US on the OTCQX platform: (OTCQX: KGFHY) http://www.otcmarkets.com/stock/KGFHY/quote.
Our next announcement will be our full year results on 24 March 2020.
You are not to construe the content of this announcement as investment, legal or tax advice and you should make your own evaluation of the Company and the market. If you are in any doubt about the contents of this announcement or the action you should take, you should consult a person authorised under the Financial Services and Markets Act 2000 (as amended) (or if you are a person outside the UK, otherwise duly qualified in your jurisdiction).
This announcement has been prepared in relation to the financial results for the Quarter ended 31 October 2019. The financial information referenced in this announcement is not audited and does not contain sufficient detail to allow a full understanding of the results of the Group. Nothing in this announcement should be construed as either an offer or invitation to sell or any offering of securities or any invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in any company within the Group or an invitation or inducement to engage in investment activity under section 21 of the Financial Services and Markets Act 2000 (as amended).
Certain information contained in this announcement may constitute "forward-looking statements" (including within the meaning of the safe harbour provisions of the United States Private Securities Litigation Reform Act of 1995), which can be identified by the use of terms such as "may", "will", "would", "could", "should", "expect", "anticipate", "project", "estimate", "intend", "continue", "target", "plan", "goal", "aim" or "believe" (or the negatives thereof) or other variations thereon or comparable terminology. These forward-looking statements include all matters that are not historical facts and include statements regarding the Company's intentions, beliefs or current expectations concerning, among other things, the Company's results of operations, financial condition, changes in global or regional trade conditions, changes in tax rates, liquidity, prospects, growth and strategies. By their nature, forward-looking statements involve risks, assumptions and uncertainties that could cause actual events or results or actual performance of the Company to differ materially from those reflected or contemplated in such forward-looking statements. No representation or warranty is made as to the achievement or reasonableness of and no reliance should be placed on such forward-looking statements.
The Company does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances or in the Company's expectations.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact email@example.com or visit www.rns.com.