Leroy Merlin hits the spot
Leroy Merlin store in the Las Mercedes industrial estate (Madrid).Victor Sainz

The year in which life was encapsulated in homes for weeks, DIY, home and gardening Leroy Merlin maintained turnover and increased profits, despite registering drops in sales of 85% in April 2020. The company opted for business continuity and adaptation, with measures such as distance trading, and tightened its belt by reducing investments. Its strategy resulted in income in Spain of 2,650 million euros, three less than in 2019, and a profit of 100.2 million, 57% more. This year it aspires to invoice 3,000 million and for this it will invest, among other aspects, in the advancement of electronic commerce, in transformation of stores and openings and in the development of new concepts.

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In full confinement and with a treasury that was beginning to suffer, in Leroy Merlin they believed that, after the closure by the covid, the home would maintain the extra importance that it had acquired. “We saw that there was a strong market to explode,” Íñigo Pérez, financial director, tells by phone. They decided then to maintain firm purchases with their suppliers and in some cases, such as swimming pools, increase them. “Saying ‘let’s buy more pools’ seems easy in the past. That was what allowed us to be one of the few operators that we had stock and that our sales figure increased very strongly in that family of products, but at that time it was not an easy decision ”, he recalls. In parallel, they negotiated with their banks. “We needed to expand credit lines so that suppliers could access the confirming and they could continue producing ”.

The home became the only setting for all the activities and the sections that were reinforced were those associated with enjoyment, such as the garden, which was the one that grew the most. The most affected were those that are part of projects, such as bathroom and kitchen renovations, which require the presence of someone outside the home. They also noted a decline in departments where customer traffic plays an important role, such as hardware.

And it is that the corridors of Leroy Merlin in 2020 passed fewer customers, although they acquired more. The affluence was reduced by 7.7% and the average purchase increased by 7.5%. “In that less traffic in the stores, the one who goes really buys. Because he has a clear need, he has verified very well what he needs and wants to invest in his home, ”says the CFO.

Remote service

The remote service was key in the strategy of the French multinational. They already had an online channel and the first days of confinement they tested the sale by phone and WhatsApp in two stores, which covered the need for advice. “In less than 10 days it was already established throughout Spain,” says Pérez. This allowed them to stay in contact with clients and keep workers out of the ERTE, which was active for just under two months. The company had a turnover of 160 million, 6% of the total and almost three times the previous year, through these modalities. Only the digital channel, with 91 million, grew 52% compared to 2019.

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These measures were complemented by other spending adjustment measures. “We made a structural savings plan at all levels of the operating account,” he says. They also reduced and postponed investments, initially out of prudence in the face of an uncertain scenario and later because, given the improvement in activity, it was not appropriate to interrupt it to, for example, transform premises. After the sharp drop in sales between March and May, estimated at some 371 million euros, the summer inaugurated a recovery phase. Increases of more than 20% every month, Pérez points out, led them to hire 2,000 people for that period. Growth continued steadily despite waves of covid and successive restrictions.

Leroy Merlin Spain, which has 129 stores and 14,300 employees, is the third most important business unit, after France and Russia, within the Adeo group. The French conglomerate, the main operator in the European DIY market and third in the global one, sells in 19 countries, has 134,000 workers and a turnover of 26,000 million euros.

To achieve the revenue objective that they have set and that they recognize as ambitious, they have designed an investment plan of 108 million, more than double the amount of 2020. On the one hand, they seek to strengthen digital commerce, which has come to stay, both the development of the platform and the improvement of the supply chain: “The on-line It cannot be separated from your capacity, speed and reliability of delivery ”, says Pérez.

The company’s bet is an omnichannel model in which flows can be crossed. “The store-only customer buys seven and a half times more than the online-only customer. But when you mix them and you have an omnichannel model, that consumer buys 14 times more than the on-line and twice as much as the one who only goes to the store ”, he adds. To reinforce the speed of the service, the idea is that the stores function as proximity logistics platforms. The main challenge is the delivery of the bulky and heavy product in 24 hours. “To do this, we opened a new regional platform in Valencia, in addition to the seven we already had.”

In physical commerce it will be invested, above all, in the expansion of the network and transformation of points of sale. Pérez talks about the opening of three large DIY stores, one already operational, and about completing the reconversion of the AKI stores into Leroy Merlin Compact, which began after the merger of both brands in 2018. In addition, they inaugurate two new concepts: a space dedicated to garden furniture and another focused on minor repairs and maintenance.

“We are developing new opportunities,” says Pérez. One of them is dedicated to professionals after last year they bet on being more open to this client who was still active and who is not the majority user of the company. “Today we have 62,000 registered in our pro club and our goal is to grow 8%.” On the other hand, they continue with the progress, slowed down by the health crisis, of Hogami, a platform for the sale of services such as removals and cleaning that they launched in 2020. They are also working on a new business model, from company to company, for the development of major reforms.

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