Castorama Poland store visit presentation

CASTORAMA POLAND
STORE VISIT 28 SEPTEMBER 2004
Today’s agenda
• Short presentation
– Kingfisher’s international network
– Poland, an attractive home improvement
market
– Castorama today, the market leader
– Castorama’s future growth potential
• Q&A
• Store visit to Targowek, Warsaw
Kingfisher international network
• Retail is a national scale game
– Need countries of some scale
– Need to be no 1 or 2 in country
• Beginning to see a network effect for us
– Global product in key GM categories
– Best practice/experience shift
• Belief is in locally adapted warehouse
– Network brings huge advantage vs local players
Three proven formats add
flexibility
Big-box
– UK & Ireland (warehouse), France, Poland
– China (core cities)
• Medium-box
– UK & Ireland (mini-Warehouse), Italy,
Poland
– China (smaller cities), Taiwan & Korea
• Small box
– France, Spain (Brico Depot/Stock)
International – a growth engine
•2004/05 Sales £593m (+29%), profit £62m (+60%)
Stores
Feb 2004
H1
opening
H2
planned
Feb 2005
Est
Poland
19
+2
+5
26
Italy
18
+3
+2
23
China
15
+3
+4
22
Taiwan
17
-
+1
18
Turkey
5
-
-
5
Spain
1
+2
+1
4
TOTAL
75
+10
+13
98
•Plus Korea and Russia in progress
International - boosting growth in H1
04/05
Sales growth
ROW
+29%
UK and Ireland
+33%
*Constant currency
France + 38%
Poland – an attractive market
• Biggest in Central Europe
–
–
–
39 million people
13 million homes
18 cities with 200k+
• High growth potential
– 2004 GDP growth est 6%
– forecasted at 4-5% ongoing
• Joined EU on 1 May 2004
Poland – an attractive market
•
•
•
•
RMI market of EUR5bn
70% home ownership
A market of natural DIY-ers
Strong interest in home
improvement
• Housing stock in need of repair
• Low income, but high disposable
Castorama today – No 1
• First store 1997
• 21 stores, 198,000sq.m
• 4,509 employees ( one expatriate )
• Highly recognised brand
• Last year sales £286m, retail profit £41m
• H1 sales up 33%, retail profit up 66%
• Above Group average ROIC and positive
cash flow
Strong growth in sales and profits
£m
Sales
Profit
LFL
13.1%
LFL
11.1%
LFL
10.2%
42
286
30
227
21
165
2001/02
2002/03
2003/04
2001/02
2002/03
2003/04
Castorama – No 1 in Poland
Stores range in size from 7,000 to 12,000 m2
Castorama today – No 1
• Highly adapted, localised format
– targets heavy DIY/trade
– In-store volumes for projects
– Clear EDLP policy
• Good locations
• High emphasis on in -store standards
• Group-sourced own-brands
• Low cost operating model
Castorama Warsaw
Castorama Warsaw – strong
price message
Own brand prominence MAC Allister advertising and stand
Relative performance 2002
Castorama
Leroy
Merlin
OBI
19
12
23
9,700
11,000
8,000
Sales €m
336
120(e)
220(e)
Sales/m 2
2.2
1.4(e)
1.2(e)
Stores
Average m 2
Castorama - growth potential
• Physical expansion
– To open around 7 stores a year
– 26 stores by the year-end
– Smaller cities important in Poland
– Scope for a smaller, ”mini-Warehouse”
– Total stores 60+ in 2009/10
– Potential for over 100 in long term
Castorama – drivers of growth
• Price
– margin reinvestment and supply chain
development
• Range
– SSM, own-label, and direct sourcing
• People
– Training and reward initiatives
• Central costs
– leveraged scale effect
What Poland brings to Kingfisher
• Significant returns and profit growth
• Volumes for European buying
• Sourcing office for Kingfisher
• Leverage position into Russia
– Shares similar market characteristics
– Similar format, common suppliers
– Transfer of expertise to Russian team
Future growth – spotlight on Russia ..
•
•
•
•
•
•
•
Positive dynamics for BIY market growth..
Most property needs extensive refurbishment
Construction market growing strongly
Property prices rising
“Empty shell” apartments
“BIY” culture
Fragmented market – few Western ‘big -box’
retailers
• The “dacha” factor
Future growth – spotlight on Russia ..
• Medium term growth in
Moscow and St Petersburg
• Longer term development
in Western ‘regions’
• Warehouse blueprint based
on Castorama Poland
• 20,000 – 30,000 sku’s
• Low price; high volume
Future growth – spotlight on Russia ..
• 144m people, concentrated west of the Ural
mountains
• 13 cities with population of more than 1 million; 33
cities of more than 500,000
• GDP growth > 5%
• Stabilised currency
• Consistent improvement in country ‘risk profile’
• Retail expenditure as a % of sales is highest in
Europe
• Estimated $6 billion RMI (Repair, Maintenance and
Improvement) market