While Kingfisher’s full-year results shows its UK business has bounced back, this growth was driven by its trade offer.
While Kingfisher’s full-year results shows its UK business has bounced back, this growth was driven by its trade offer both at its Screwfix fascia - where sales grew by 17.6% due to aggressive expansion programme, opening 60 stores during the year, and an excellent like-for-like performance of +7.3% - and at its in-store TradePoint offer, where sales grew by 7%.
This indicates that its consumer sales are likely to be broadly flat, a disappointing performance considering the market conditions and how its competitors performed.
The housing market has shown signs of improvements with housing transactions up by 12.4% in 2013. Its competitors have been better able to take advantage of these conditions with Homebase, increasing sales by 3.6% in 2013/14 despite closing 13 stores, and Travis Perkins Consumer, which grew by 2.4% in 2013.
One area in particular where B&Q has not capitalised upon has been kitchens and bathroom sales. During the second half of its financial year, Homebase reported that big ticket sales had driven growth while UK sales through Nobia increased by 7.9% in 2013. Wren has not yet reported its 2013 results, but indications are that it had a strong year and the forecasted first half growth for Topps Tiles shows that there is buoyancy in the market which Kingfisher is not capitalising on. And with IKEA launching its first new kitchen range in 25 years, this sector is set to become even more competitive.
With both the housing market and consumer confidence set to strengthen in 2014 and B&Q going up against two very soft first quarter comparatives, as the weather severely impacted gardening sales, it should have a strong start to the current financial year. However, the competition among the DIY superstores has strengthened considerably. Homebase and Wickes have significantly improved their offer in terms of price, range, and store environment and have closed the gap between themselves and B&Q.
Kingfisher is taking steps to develop its offer, with a review of 19 categories to ensure they meet consumer demand and passing cost savings it makes from simplifying its supply chain onto customers.
Although this will help, the review is set to be concluded in the summer of 2014 and it will take time to implement the changes across its stores. While its position atop the DIY & gardening market and as a major player within the furniture market are not under threat in the short-term, it will have to work hard to prevent the distance between itself and its competitors being eroded further.
Matt Walton is a retail analyst for Verdict