Kingfisher Plc · LSE:KGF
Kingfisher — Investor Presentation (January 2000)
45 slides from Kingfisher's investor presentation, Jan 20, 2000
Slide 1: Global Sourcing at Kingfisher
Global Sourcing at Kingfisher Analysts & Investor Briefing January 20th 2000
Slide 2: Agenda
Agenda 4.00pm Introduction Geoff Mulcahy Chief Executive 4.10pm Overview of Global Dido Harding Sourcing Director of Global Sourcing 4.40pm Kingfisher Electrical S.A. Serge Amiard Common European Commercial Strategy Director, KESA 5.10pm Questions
Slide 3: World class retailing
World class retailing • Polarisation between world class winners and local losers • Hallmark of being world class is ability to generate high rate, long term growth • We need engines for growth, to deliver sustained long term value
Slide 4: Building an engine for growth
Building an engine for growth Marketing scale, DEVELOP POWERFUL FORMAT Pricing reinvestment Scale gains CAPABLE SOURCING, SUPPLY CHAIN Bigger roll out MAJOR EXPANSION GROWTH Allows re-investment into virtuous circle
Slide 5: The gross and net margin question
The gross and net margin question • There is nothing new about falling gross margins in Kingfisher • Don’t believe all the PR • Media interest + international comparisons have increased profile • In most areas of our business we are leading the agenda
Slide 6: Our objective
Our objective • To generate more cash margin over the same fixed investment, thus: – increasing stock turn – increasing ROI – measure GMROI • By removing artificial price discounts – in-store discounts – 50% off deals – artificial sales Best price all the time, Best choice, Best service
Slide 7: Illustrative example
Illustrative example Before After Before sourcing cost advantages Price 100 95 Product cost 65 65 Gross margin 35 30 Instore discounts 4 - Advertising 6 4 Redundant stock 3 1 Achieved gross margin 22 25
Slide 8: Illustrative example
Illustrative example • Customer pays lower price of 95 vs.(100-4=96) • Retailer achieves higher gross margin • Smoothed demand gives manufacturing and supply efficiencies which will give improved terms
Slide 9: The winning formula
The winning formula The retailers that survive & prosper are those that have a strategy to continue to improve the customer offer • Price • Service • Choice
Slide 10: Kingfisher has these characteristics
Kingfisher has these characteristics • leading market positions • international scale • efficient retail formats and supply • global sourcing which benefit • our customers • our employees and add value for our shareholders
Slide 11: Overview of Global Sourcing
Overview of Global Sourcing Dido Harding Director of Global Sourcing
Slide 12: Objectives
Objectives • What is Global Sourcing? • How much is it worth to Kingfisher? • What are we doing about it?
Slide 13: What is global sourcing?
What is global sourcing? 1. Joint buying.
Slide 14: Joint Buying of Camcorders
Joint Buying of Camcorders Number of SKUs 117 = joint buying opportunities 67 50 5 45 34 11 Total Identical Total Similar Total Sold in Unique SKUs after after more than to one matching identical one OpCo OpCo identical & similar
Slide 15: Joint European Buying: Why can we do this now?
Joint European Buying: Why can we do this now? • Customer needs are changing • The internet and the Euro are creating much greater price transparency è more commonality across Europe • Kingfisher now has the scale and the geographic coverage • Our suppliers are increasingly capable of operating on a
Slide 16: What is global sourcing?
What is global sourcing? 1. Joint buying. 2. Direct Sourcing
Slide 17: Examples of Direct Sourced product
Examples of Direct Sourced product • B&Q knife – WAS sourced for 88p – NOW sourced for 40p • Castorama wrench – WAS sourced for FF8.50 – NOW sourced FF2.00
Slide 18: Kingfisher's Asian Direct Sourcing
Kingfisher’s Asian Direct Sourcing £m Value Bought at FOB 400 185 113 83 39 53 34 1995 1996 1997 1998 1999 2000 2003 budget goal
Slide 19: Kingfisher's Asian Direct Sourcing
Kingfisher’s Asian Direct Sourcing £m Value Bought at FOB 400 185 113 83 39 53 34 1995 1996 1997 1998 1999 2000 2003 budget goal
Slide 20: What is global sourcing?
What is global sourcing? 1. Joint buying 2. Direct sourcing 3. Brand development
Slide 21: PROline
PROline
Slide 22: Cash Benefits from Global Sourcing
Cash Benefits from Global Sourcing 1999/2000 Million Euro 16 42-58m 9 10 23 DIY KESA Cross Direct Total Joint Joint Group Sourcing Buying Buying Joint including Buying Proline (Estimated)
Slide 23: Potential Cash Benefits by 2003/4
Potential Cash Benefits by 2003/4 Million Euro per annum 80 290 110 100 DIY Electrical General Group Merchandise Total
Slide 24: What do we need to do?
What do we need to do? • Think Kingfisher and Kingfisher sector not OpCo • Know where and how our products are made AND what our customers want • Make it easy • Make global sourcing part of our business culture
Slide 25: What is our action plan?
What is our action plan? • Joint Buying – Continue to capture quick wins – Implement more effective ways of buying within sectors and across sectors
Slide 26: What is our action plan?
What is our action plan? • Direct Sourcing – Continue to develop Kingfisher Asia in Hong-Kong – Opening a satellite sourcing office in Shanghai – Implement new direct sourcing processes – Develop plans for a larger direct sourcing network
Slide 27: What is our action plan? – Extend PROline range and build the brand
What is our action plan? • Brand Development – Extend PROline range and build the brand – Examine our other own brands
Slide 28: In summary
In summary • There is a huge sum of money to be gained • It will be a great challenge - and will require a truly global multicultural business • and we have a big action plan already well underway to deliver it
Slide 29: European Common Strategy and Approach
E L E C T R I C A L European Common Strategy and Approach
Slide 30: Electrical Competitive Landscape
Electrical Competitive Landscape • Retail is going global – Large global retailers are our competitors • Internet and Euro give price transparency • Europe is becoming one territory – Three major players with different approaches – New entrants: internet, overseas
Slide 31: Changing Consumer Needs
Changing Consumer Needs • Communications, Design... • Upheaval in value sources – software, subscriptions, accessories • Digital Technology – From boxes to solution • Converging pattern across countries
Slide 32: Our ambition: Leveraging Commercial Advantage
Our ambition • A leading position in each local market • The leading position in the European market by • Opening Euro-format stores • Developing E-commerce è Leveraging Commercial Advantage • Building consistent IT systems and supply chain
Slide 33: Leveraging Our Commercial Advantage Objectives
Leveraging Our Commercial Advantage Objectives • Combine international scale and local flexibility in order to: – bring a better offer to our customers – change the relationship with suppliers in order to significantly reduce sourcing costs – achieve profitable growth
Slide 34: Customer Strategy
Customer Strategy • To provide complete peace of mind: – Service that focuses on making our customer’s life easier – Offer a choice of products and solutions that is comprehensive yet easy to understand – Prices you can trust whenever you choose to buy
Slide 35: Implications for our Business
Implications for our Business What we need How we must do it • Continue to focus on • Improve local customer needs responsiveness in developing category management in the OpCos • Significantly reduce • Centralise negotiation sourcing costs
Slide 36: Leveraging Commercial Efficiency
Leveraging Commercial Efficiency Lever 1 Harmonise terms on identical products Lever 2 Lower the costs by reducing the complexity of ranges Lever 3 Shift volumes to private label to lower the buying cost of entry price products Lever 4 Reduce the number of B brands to optimise the negotiation
Slide 37: Potential for SKU count reduction
Potential for SKU count reduction Electrolux range BUT Comet Darty NVDB Promarkt AEG 50720 AEG 60309 Possibility to bundle FAURE ZANUSSI ZANUSSI ZANUSSI FLS 1022 12 different LFV 1022 FLS 1183 FLS 1082 models into 5 and to ZANUSSI ELECTROLUX harmonise FJS 1597 AW 1475 F prices on identical items A M
Slide 38: Working in co-operation with suppliers can lead to cost savings on both sides
Working in co-operation with suppliers can lead to cost savings on both sides Number of SKU’s purchased % of SKU’s with purchase over 50 units Comet 89 100% Promarkt 171 25% Darty 172 100% BCC 217 53% 316 22% NVDB BUT 479 44% Source: Analysis of a sample white goods category in 1999
Slide 39: Size of the Prize
Size of the Prize Benefits of About 110m Euro Estimated Benefits Potential value Euro million 110m LEVER LEVER 2-4 2-4 LEVER LEVER 11 10% 20% 30% 40% 50% 60% (13%) PROPORTION PROPORTION OF OF IDENTICAL IDENTICAL MODELS MODELS
Slide 40: Future Organisation: Key Processes
Future Organisation: Key Processes SECTOR Supplier Selection • Selects suppliers based on OpCos' input Model Listing • Defines range architecture and selects sku's • Makes recommendations on distribution of the Store Range Building core range Negotiation • Negotiates with supplier Retail Price Setti
Slide 41: Making it Happen
Making it Happen • Change process will take one year – Start with suppliers which are ready – Test new process – Build up the new skills • Need to progress as fast as possible, and start quickly: – Show clear commitment – Deliver real benefits • Will take “first steps” from February 2000 – Start to
Slide 42: What Will Happen Next Year
What Will Happen Next Year 20% 80% Target % Of Purchase Budget Negotiated Centrally Negotiated Centrally Additional Additional % Of Suppliers 10-12 10-12suppliers suppliers 20-25% 20-25% budget budget 0% First Steps 0% Now By By End Of August Year
Slide 43: How Transition Will Progress
How Transition Will Progress Suppliers Suppliers Option 1 : By category, all suppliers 7 Suppliers Suppliers Option 2 : Suppliers By supplier, all categories 7 Categories at once Suppliers Suppliers Option 3 : Gradually by supplier 4 Suppliers Option 4 : “Big Bang” 7
Slide 44: Summary
Summary • Leveraging our commercial advantage is critical in delivering our vision & strategy – We will be the first to do this – And we must learn by doing • Significant benefits are available • 2000 will see the start of a process to realise these benefits – Real customer focused approach – Transf
Slide 45: Questions
Questions