Freitag, 27. März 2009

Chinese Real Estate

Another victim of China's real estate slump:

Kingfisher, a large british DIY retailer (it also has a stake in Germany's Hornbach Baumärkte), reported sharply lower sales in the financial year ended 1/09: China revenue was down 24 %.

Quotes from the press release:

"...the dramatic housing market slowdown has impacted performance and exposed internal operational issues that have exacerbated the impact of the market slowdown on reported losses ... ambitious expansion in recent years had been too fast, resulting in a rump of loss making and oversized stores. The business had become too reliant on a booming apartment design and installations market ... The plan encompasses rationalising the store portfolio from 63 to 41 and revamping the remaining stores, 17 of which will also be downsized ... An accounting write off of £107 million has been booked in 2008/09 ..."

Of course it's possible (and even admitted to some extent in the investors presentation) that Kingfisher had simply mismanaged its China expansion, i.e. didn't offer the customers what they wanted. But it does sound like they were caught on the wrong foot by massively lower demand for home furnishing products... In any case: Yet another ambitious foreign investor that got burnt trying to profit from China's limitless business potential...


  1. It is a 50% drop in the sales.
    It is in line with the news about the empty malls and so on.
    I think they try (or tried) to make a business based on the UK and German market.

    I remember,this process was 12 year in hungary, to go from the first hyparmarket and mall to the saturated market.It was a shorter time preiod for poland,due to the cheap loans in tha past few year.

    And pls. put the links into the posts.
    I like your AADHD blog,but I miss the links.

  2. Not sure why you are saying it is a 50 % drop. Kingfisher's announcement says it is 24 %. Quote and more details taken from here:

    AADHD as in: Adult attention deficiency hyperactivity disorder? Oh my! Not sure if I should feel complimented or chastised... ;-)

    Regarding links: The cues for many of my posts come from the print press, in particular FT UK and FT Deutschland. Unfortunately, it's a bit hard to provide links to the print edition. But if/when I refer to online sources, I can try to include more direct links.

  3. IKEA does seem to be more successful in China than Kingfisher is:

    - They are still expanding, and have just opened their 7th store (though 7 stores in all of China is much more modest than what Kingfisher has done; better slow and thorough than fast and sloppy, I suppose...)

    source: [url=]Ikea opens store in Dalian[/url]

    - They just announced that 2008 sales increased by 25 % compared to 2007. Apparently, they are aggressively slashing prices to attract customers, as stated [url=]here[/url].

  4. Tried to give titles to my links instead of showing the complete bulky web address. But apparently, it doesn't work on Blogger the way I thought it does. And apparently, I can't even edit my own comments. Oh well.

  5. I mean 50% reduction in the shoop floor size,and with this in the sales.
    The closed shop will generate 0 sales.

    We can say that they have 50% overcapacity.

    (ok , this is retail)