Kingfisher seeks to reduce property costs in new strategy
B&Q’s parent company Kingfisher has identified “significant” cost-saving exercises, including property cost reductions and lease renegotiations, as it withholds guidance for its 2020-21 year.
The DIY group, which also includes Screwfix in the UK and Brico Depot in France, posted a 21.8% like-for-like improvement in sales for the second quarter ending 13 June, as stores began to reopen. This compared with a 24.8% decline in Q1.
However, the retailer stopped short of providing specific guidance for its 2020-21 financial year, citing the continued uncertainty around the pandemic.
B&Q’s parent company Kingfisher has identified “significant” cost-saving exercises, including property cost reductions and lease renegotiations, as it withholds guidance for its 2020-21 year.
The DIY group, which also includes Screwfix in the UK and Brico Depot in France, posted a 21.8% like-for-like improvement in sales for the second quarter ending 13 June, as stores began to reopen. This compared with a 24.8% decline in Q1.
However, the retailer stopped short of providing specific guidance for its 2020-21 financial year, citing the continued uncertainty around the pandemic.
Pretax profit fell 65.7% to £103m in the year ending January, while sales across the group dropped by 1.5% to £11.5bn on a constant currency basis.
The value of the retailer’s portfolio, which comprises more than 1,350 stores, fell to £2.9bn on a sale-and-leaseback basis in January, down from £3.4bn in the previous year.
The £500m decrease was underpinned by underlying declines in property market values in France and the UK of £300m, as well as £200m from property disposals and adverse movements in foreign exchange rates.
The group said that as a result of its performance during the 2019/20 year, it revised future projections for a number of stores across its portfolio, resulting in £118m in write-downs.
These largely related to impairments of freehold and leasehold properties, recorded principally in Castorama France and B&Q in the UK and Iberia.
Around 40% of the retailer’s estate is freehold. The average WAULT for its leasehold portfolio is around seven years.
Kingfisher has highlighted “significant cost reduction opportunities across Kingfisher – in areas such as goods not for resale, store operating efficiencies, property costs including lease renegotiations, supply and logistics and central costs, all of which will benefit from reduced organisational complexity”.
The group generated cash proceeds of £188m through a combination of sale and leasebacks and freehold sales during the year.
As part of its new strategy to reduce costs, Kingfisher said it will test new concepts, “reshape” its store footprint and redesign the store operating model to enable a more efficient delivery and click-and-collect network.
“We will manage our existing store portfolio actively with a greater focus on achieving lower property costs and higher sales densities, while accelerating new store concept trials,” said the retailer.
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