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Opening quote: Kingfisher’s semifinished DIY work



Half-year results of the kingfisher

How difficult can it be to sell barbecues and the sun-burnt gazebos to the most sensitive French? Very difficult, according to B & Q and the owner of Castorama Kingfisher – although not as difficult as the desperate homebase has found him.

With almost no one in Britain pre-Brexit who moved home or garden, the Anglo-French DIY chain reported a 0.5% share of sales in parity in the UK and Ireland, while total sales in B & Q are decreased 2.3 percent to £ 1.8bn, or 2.5 percent like for like – offset 10.4 percent sales growth, or 4.5 percent as a like, at the supplier of the Screwfix dealer.

But France continues to be the nuage noir à l'horizon. Total sales of Kingfisher in France decreased by 2.1 percent, or 2.4 percent, to 2.267 million pounds, reflecting the weak performance of the Castorama chain, only partly offset by the improved performance of Brico Dépôt .

Even more worrying, however, were the observations on the five-year transformation plan of the chief executive Veronique Laury, called ONE Kingfisher. It aims to develop unique products for do-it-yourself companies. But it continues to vomit so many "challenges" that the executive in charge of unification of the supply chain is jumping out of the white van halfway.

Arja Taaveniku, chief offer and supply chain officer, joined Kingfisher only three years ago, with the task of unifying the ranges within the group. But with 42% of the unified Kingfisher products after two and a half years, "Arja recognized that it's the right time to change leadership for the function."

Meanwhile, Kingfisher admits three persistent challenges: sales at Castorama, where "the client's overall perception is not where it should be"; another 40 basis points down the gross margin due to "logistical and equity inefficiencies"; and too much stock influencing working capital.

Key numbers:

  • Group like-for-like sales down by 1.1%
  • Gross margin down 40 basis points

Bottom line: The pre-tax profit drops 14.8 percent to 375 million pounds.

How was the city expected? In terms of revenues, probably yes. The second quarter upgrade of Kingfisher had shown that Castorama was still the gros problème with a 3.8% drop in sales in the second quarter. But the constant challenges and change of staff will worry critics of the city of Kingfisher.

What was said: Laury said: "Transformation on this scale is tough and there are challenges we are facing." There is still much to be done to improve our performance in France and remove inefficiencies in the business as we continue to transforming ourselves to the rhythm … The environment is making our task harder than expected ".

Verdict OQ: Kingfisher is in the middle of its five-year turnaroid plan, with little to show in terms of sales performance, as the continued interruption of stores only exacerbates the weak commercial conditions in the UK and France. Losing executive power for the central part of the plan – halfway – says it all.

Survey on the merger of Sainsbury-Asda

Thus, J Sainsbury's boss, Mike Coupe, will not be "in the money" – as he once sang famously – yet. This morning, the British Competition and Market Authority confirmed that it was referring to the proposed merger between Sainsbury and Asda for an in-depth investigation into "phase 2". He stated his preliminary investigation that the agreement "raises enough concerns to report for a more in-depth review". But Mr. Coupe always knew that. Indeed, Sainsbury and Asda had requested a "quick" referral to this "Phase 2" probe.

Key numbers:

  • 31 percent – probable market share of Sainsbury Asda's combination, based on Kantar data;
  • 28% – market share of the current Tesco supermarket number one.

Bottom line: Sainsbury will have to lose some stores to get this.

How was the city expected? Yes. Mr. Coupe had always admitted that the organization resulting from the merger would have to sell off some stores to get the deal approved. "It is certain that the stores will have to be disposed of – the million dollar question is how many and to whom, and we will work with the authorities in this regard," he told FT at the start of this month.

What was said: The CMA said: "Companies are two of the largest food retailers in the UK and their stores overlap in hundreds of local areas, where buyers may have to face higher prices or a worse quality of service."

Verdict OQ: Sainsbury had always suggested that any investigation of competition would be based on the benefit of the consumer – he was confident – and not on the impact of the supplier, whose adversaries had warned. So it is interesting the announcement of the CMA that will examine the issues "related to fuel, to the general merchandise (such as clothing) and to the" increase of the buyer power "on suppliers".

The current Longobard column focuses on Santander's interest for the city broker Peel Hunt

How to write a research note from a broker. Open the announcement of business results on your computer. Highlight the first three paragraphs and the "outlook" section. Press Ctrl + C. Press Crtl + V. Add the share price forecast: "Execute Market". OK, so it's pretty unfair. And perhaps a bit hypocritical from a journalist. But this is how a search for analysts may appear – and why others question their value now that the Mifid II regulations mean that asset managers pay separately.

This would certainly explain why, on Tuesday, the Cenkos broker said that its research and commission income fell by 12% and that its pre-tax profit fell by 90%. What would not explain, however, is why the Spanish bank Santander is said to be negotiating to buy the Peel Hunt broker.

Read the rest of today's Lombard column here.

FT Opening Quote, with comment by Matthew Vincent, is your first Square Mile briefing. You can receive it by email at 8:00 am every morning by registering here.


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