Kingfisher launches a “profitability plan” for Castorama in France

Kingfisher, owner of the Castorama, Brico Dépôt, B&Q and Screwfix brands, has some 2.000 stores in eight countries, mainly in the United Kingdom, Ireland, France and Poland.

After lowering its forecasts for its 2023-2024 financial year ending at the end of January in September and then in November, the group published on Monday a net result for this financial year down 26%, to 345 million pounds. Its turnover stood at 12,98 billion pounds, almost stable over one year (-0,6%).

In the United Kingdom and Ireland, the group's brands “achieved resilient sales and gained market share,” the company said. But the French market was "affected by a low level of household confidence", summarized the general director of Kingfisher, Thierry Garnier, quoted in a press release from the group.

The manager indicates that Kingfisher "presents today a new plan intended to simplify the organization in France and significantly improve the performance and profitability of Castorama France, a plan which notably provides for the optimization and modernization of the store network" .

The company has therefore set itself "a medium-term operating margin objective of 5% to 7%" in France, where the combined turnover of its Castorama and Brico Dépôt brands fell by 5,9% ( on a comparable basis) during the last financial year.

Concerning the 95 Castorama points of sale operated in France, “around a third of them are the least performing stores in our portfolio”, explains Kingfisher. Work will be carried out in 13 stores during the 2024/25 financial year, three of which will see their surface area reduced, according to the group. Others will be modernized and a Castorama store will be “converted to the Brico Dépôt format, which is more profitable”, he specifies.

Setting up the franchise

Castorama will also have to "improve its operating margin", by further reducing its costs at several levels (in-store productivity, head office costs, supply chain) while improving its turnover per m2, for example by emphasizing commerce with professionals or by capturing the strong demand linked to energy renovation.

Another axis: strengthening the online offer. Last week, Castorama announced the launch of its marketplace offering 500.000 additional product references from third-party merchants, with the objective of "boosting traffic and stimulating sales" on its current site which records each month "between 10 and 15 million visits".

Kingfisher also announced Monday that it would “test in the next 12 months” the franchise model for two Castorama stores in France.

Via this transfer "of the operation of the point of sale to a franchise partner, with the right to use the Castorama brand against the payment of royalties", all store operating costs will thus be transferred to the franchisee.

Last week, the CGT federation of Commerce and Services denounced in a press release the "Machiavellian strategy" of "rental management" which Kingfisher wishes, according to the union, "to extend during the next store openings in France", believing that it “condemns employees to lose their social benefits, for the benefit of a group hungry for profits”.

Referring to the outlook for the current financial year, Kingfisher believes that the activity "should prove resilient thanks to the good performance of repair, maintenance and renovation work on existing housing".

“However,” the group says it is “cautious about the overall market outlook given the time lag between demand on the real estate market and demand for home improvement.”

It thus says it expects for 2024-2025 an adjusted net profit before tax to fall again, "between approximately 490 and 550 million pounds sterling", compared to 568 million achieved for the last financial year.