Castorama France June 2008
The History of Castorama Number of stores 130 120 110 100 90 80 70 60 50 40 30 20 10 0 1969 1971 1977 20 stores 7 Italia 1992 15 Briker Brico Dépot 32 stores transferred to BD Poland Castorama actual 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 Castorama + stores transferred to BD 2
A winning concept until the end of the 90 s, which no longer fits the market in 2002 Brand image Historic Strengths Strong brand awareness : legitimacy (as a pioneer, a leader), seriousness Still leader in overall Brand Capital Consequences Masculine & technical identity In a market undergoing feminisation and tending towards decorative & showroom Communication Range / Products /Prices Remember Chez Casto, y a tout ce qui faut ( At Casto s, there s everything you need ) Leader in Hardware Leader in Gardening Competitive in Building Wide range of products Quality Has not followed the evolution of the clientele, which has moved on from just home repairs to home improvement projects Weaker Decorative Weaker Showroom Lack of clarity in the structure of the ranges Bad price positioning Stores / Merchandising Fast development International development Heterogeneous store portfolio Lack of investment and maintenance 3
In this context, in 2003, it was decided to change our way of running the business Use the strength of the Castorama brand and its know-how Take into account the market evolution and customer trends : Development of a more feminine market (decoration, showroom) Development of discount retailers (reinforce price issues since 2002) Transform the business model and reposition Castorama : Price Offer Organisation Economic model In order to not simply regain lost ground but move forward and become again a brand of reference on the home improvement market 4
beginning a major and ambitious transformation programme 6 strategic main lines : Revenues Evolution of Products and Services Offer Productivity CPR Price Efficiency Store Investment Programme Supply Chain 3 phases : Structuring the organisation, the teams Re-acquisition of the basics through strong actions Adjustment, optimisation and continuity 1 aim : Launch ambitious medium/long term projects while upholding business performance versus 2002 5
needing a high level of investment Supply Chain Store Investment Range Price CPR Efficiency 2003 2004 2005 2006 2007 Redefine principles and organisation design INVESTMENT Return to basics / High Investment RETURN Improvement / Return on Investment 6
while upholding business performance Price 1 st on the DIY Traditional players > 100mil investment New concept 40% redeployed stores outperforming sales growth Property : 1,2billon Supply Chain x2 of m² (eg. Chatres 60 000m²) Direct from 58,2% to 50,1% New cross-dock warehouses IT roll out Product Offer 40% families of product renewed < 50% turnover 100% stores = A range /FTE / per worked hours Organisation 3% 97% +36% 88% 12% 2002 2007 Retail Operating Profit ROP constantly superior to that of 2002 (average growth: double-digit) 7
The first results of the strategy are obvious 12% 10,7% 10% 8% 6% Castorama 6,0% 4% 2% 0% -2% -4% -6% Market Castorama CS Market Fev.-May June-Oct. Oct.- Jan. 7,8% 4,4% 4,6% 5,8% 2,5% 0,6% > > > Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Fev-08 8
Price A necessary investment, a rapid image improvement 2003 2004 2005 2006 2007 Redefine principles Return to basics / Improvement / and organisation design High Investment Return on Investment Strong price focus: Range restructuring: Margin optimisation: Entry price product Aggressive promotions Check on competitors CPR development Definition of ranges Price scales Launch of catalogues Own brand development Local price promotions New pricing tool Third traditional DIY player on prices A convincing price position to be maintained 9
Price A necessary position to maintain Negative Impact BASIC DRIVER Price Price SECONDARY BONUS Positive Impact 10
But price is simply not enough to make the difference in the market It is the performance of the economic model that will make the difference between retailers : Free up resources in order to invest in price positioning Develop key business to generate margin 11
which confirms the relevance of the strategic range programme 2003 2004 2005 2006 2007 Redefine principles and organisation design Define strategies and align organisation: Redefinition of Product strategies (GPS) Clarification of head office and store responsibilities Return to basics / High Investment Build the offer and begin roll out: New product hierarchy Marketing principles ABC range Blueprints and planogrammes 1st range reviews Improvement / Return on Investment Range roll out and optimisation: ABC range in stores Performance analysis Optimised range review 12
Offer A driver to accelerate performance Negative Impact BASIC DRIVER Product Product SECONDARY BONUS Positive Impact 13
Two main axes to develop offer 1. Offer modernity Feminisation Styles and stories Frequency of range renewals Sustainable development solutions New technologies 2. Easy access to offer Price Self-service Sales supports Own brand 14
Offer Improving the legibility of the offer through Own Brand Price Price OB Selection OB Core 1 st Price Old : April 2005 Quality New : April 2006 Quality Own brand sales are increasing Profitability is better with own brand products Coverage of all levels of price scales 15
Offer Clarification of Own Brand territories Categories 1st Price OB Core OB Selection Brands Decoration Wall, floor, windows Lighting, panelling Interior showroom Bathroom, kitchen, storage Internal carpentry Comfort Products Heating, airconditioning Water & air treatment Automation, security Exterior showroom Garden furniture, swimming pool, barbecue, lighting, external fit out Tools Hand tools, garden tools Supplier Brands Power tools Handheld drills, motorised garden tools 16
Offer Development of brand legitimacy : the example of paint Range restructuring Brand creation and repositioning Redefinition of Merchandising Average selling price Footfall Average transaction value Sales Feb-May 06 June-Sept. 06 20 07 17
Offer Successful repositioning : the example of wooden flooring 2004 : Aggressive price positioning Laminate Avg Price of goods sold : -24% 2005 : Range restructuring Parquet Avg Price of goods sold : +11% 2006 : Range restructuring Parquet / Laminate Avg Price of goods sold : +4,3% Sales : Quantity : Margin : Sales : Quantity : Margin : Sales : Quantity : Margin : Create footfall and legitimacy Develop the business Trigger leadership 18
Offer Acceleration of the frequency of changes : the example of curtains 2005 : Aggressive price positioning and range structuring Curtains Avg Price of goods sold : -9% 2006/07 : Increase frequency of range reviews 2 collections a year Range optimisation Through homogenous merchandising Continue development of Direct Sourcing Sales : Quantity : Margin : 2003 2004 2005 2006 Sales Quantity Margin Create footfall and develop business on key categories Reinforce legitimacy of the whole department 19
Offer Styles and stories 20
Offer Styles and stories 21
Histoire Contemporaine 22
Histoire Technicolor 23
Histoire Charme 24
Histoire Authentique 25
Sustainable development From behaviour to business Negative Impact BASIC DRIVER 89% of French people feel concerned Sustain. Devlpt 7,5Bil spent by customers on energy saving products New European legislation Sustain. Devlpt Base : customers who buy DIY products (100% ) = 970 Total: important Quality of the product 97% Health risk 94% Price 93% Environment preservation 84% SECONDARY Sustain. Devlpt BOOSTER Energy savings 83% Positive Impact Promotion 80% Origin 39% Source : Audirep jan 07, IFOP may 06 26
Offer Sustainable development : From behaviour to business Develop partnership Develop products Co-label : 1700 products 27
Offer Sustainable development : From behaviour to business R&D and advice Communication +2008 : New catalogue 28
Offer Sustainable development : better communication Visuel maison Eco + aide au choix 29
Offer Sustainable development : better communication 30
Store revitalisation programme : 4 new stores, 16 relocations and 13 revitalisations since 2003 2003 2004 2005 2006 2007 % roll out 3% 13% 24% 33% 40% Average age if no action Average age of Casto portfolio 16.0 17.0 18.0 19.0 20.0 15.4 14.7 13.3 12.9 12.4 31
Economic model Cost reduction to sustain the transformation Evolution of the / FTE / worked hours % of stores 2002 2003 2004 2005 2006 2007 Practical training +36% per worked hours 2nd target agreed in 2005 3% 97% 16% 84% 48% 52% 68% 32% 84% 16% 88% 12% E-learning % staff available for customers 48,5% 53,0% 53,7% 55,2% 56,9% 58,2% Staff costs 2007 < 2002 in mil +9,7pts of staff available for customers 32
Change Curve Phase 1 : 2003 Hénin Serenity Phase 2 : 2006 Englos Blindness Lucidity Concern Phase 3 : 2008 La Défense 33
La Défense : Stakes and first lessons 34
4 million inhabitants 150 000 business centre staff 55% of medium & superior socio-professional groups 35
9500 m² on two levels in the 4 Temps Shopping Centre 200 staff 153000 till receipts in 2 months 36
The stakes of the store at La Défense 1. A question of image for Castorama and the Group Clients Suppliers Press 2. A commercial stake Invent a new store organization to correspond to customers projects Boost sales through a cross-disciplinary offer Give a unique buying experience Simplify access to the product ranges The store at La Défense is a new step of the evolution of 37
Image of Castorama and the Group Suppliers Conference 384 people For 84% of them, this conference met their expectations A conference, which gave a new image of Castorama on The evolution of the store concept Its vision of the market Its role 38
Image of Castorama and the Group Press Conference 115 journalists of which All the Home specialists Les Echos Le Figaro Le Parisien Libération 39
Image of Castorama and the Group Effect in the Press 60 so far Many effects: TV, written press, radio 40
The stakes of the store at La Défense 1. A question of image for Castorama and the Group Clients Suppliers Press Analysts & Investors 2. A commercial stake Invent a new store organization to correspond to customers projects Boost sales through a cross-disciplinary offer Give a unique buying experience Simplify access to the product ranges 41
Invent a new store organization to correspond to customers projects From a store organised by department to a store organised by project 42
Organization of our offer according to the customers projects I find the light! Turnover (tax inc.) National ranking LA DEFENSE 1 X 3 Avg in France 1st product family of the store : 5 % of total Turnover 43
Organization of our offer according to the customers projects I set up my workshop Turnover (tax inc.) National ranking X 2,2 LA DEFENSE 2 Avg in France 44
Organization of our offer according to the customers projects I maintain my house Turnover (tax inc.) National ranking X 3 LA DEFENSE 1 Avg in France 45
Boost sales through a cross-disciplinary offer Deco Story corner Turnover (tax inc) : 5,5 % of the Decor Turnover 2,2 % of the store turnover 46
Boost sales through a cross-disciplinary offer Bathroom accessories Turnover (tax inc.) National ranking LA DEFENSE X 2,8 1 Avg in France 47
Boost sales through a cross-disciplinary offer Organise products per style : Frames Turnover (tax inc.) National ranking LA DEFENSE X 4,9 1 Avg in France 48
Boost sales through a cross-disciplinary offer Organise products per style: Textiles Turnover (tax inc.) National ranking LA DEFENSE X 4,2 1 Avg in France 49
Give a unique buying experience A store which puts products in their global project 50
Give a unique buying experience A pleasant store Dynamic visual communication Olfactive Merchandising Musical background Coaching 51
Give a unique buying experience A store which supports the customer 52
Simplify access to the product ranges Sustainable development «The Eco House», a sustainable development message, through product offers in every department of the store 53
Simplify access to the product ranges Electric Bulbs Turnover (tax inc.) National ranking LA DEFENSE X 2,6 2 Avg in France 54
Simplify access to the product ranges Multichannel Web Site - Desks 55
Castorama France June 2008