Leroy Merlin SA

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Leroy Merlin SA

Rue Chanzy - Lezennes
59712 Lille Cedex 9
France
Telephone: +33-03 2880 8080
Fax: +33-03 2880 8008
Website: http://www.leroymerlin.com

Subsidiary of Auchan SA
Incorporated: 1923 as Au Stock Américain
Employees: 21,200
Sales: EUR 3.77 billion ($3.7 billion) (2002)
NAIC: 444130 Hardware Stores

Leroy Merlin SA has built one of Europe’s top Do it yourself (DIY) and home improvement retail groups. The company is the market leader in France, Spain, and Portugal, and also holds a prominent share of the Italian market. Leroy Merlin also operates stores in Poland, Brazil, China, and Belgium. In total, the company’s retail network extends to more than 200 stores, most of which operate under the Leroy Merlin name. The average sales surface of a Leroy Merlin store is 10,000 square meters. Other store names in the group’s network include Obi, based primarily in the south of France, and Aki, in Spain and Portugal. The company is also rapidly expanding its deep-discount format, Bricoman, which specializes in construction materials, with an average selling space of 2,700 square meters. Leroy Merlin has been at the forefront of DIY trends in France—where the home improvement market is also one of the largest leisure segments—transitioning its emphasis from pure DIY products to an increasing emphasis on home decorations and services. The company also has taken the lead in offering installation services, allowing its customers to take advantage of attractive sales tax cuts on artisan-installed products. Leroy Merlin produces nearly EUR 4 billion in revenues. The company is owned at approximately 88 percent by France’s retail powerhouse Auchan SA (the remaining 12 percent is held by employees).

From Surplus to Building Supplies in the 1920s

The Leroy family’s commercial activity stemmed from at least the 1890s, when a Mrs. Leroy began selling groceries door to-door in the village of Billy Berclau, in the Pas de Calais region of France. Leroy proved an able saleswoman, and before long enlisted the aid of her son, Adolphe, then working as a miner, to help her in the evenings. Adolphe later took over his mother’s business, which remained prosperous until World War I.

By the end of the war, the village had been destroyed, and Leroy’s business had been ruined. The family moved to nearby Noeux les Mines, and Adolphe Leroy started a new business, now focusing on army surplus items left behind by the U.S. Army. The new business flourished rapidly, and Leroy brought his children into the business, especially son Adolphe.

In 1921, the family opened its first store in Noeux les Mines, called Au Stock Américain. The father-son team innovated by providing free delivery. Two years later, the elder Leroy turned that business over to his son. The following year, the younger Leroy married Rose Merlin, also from Billy Berclau, whose family had been in the retail business for several generations.

Leroy and Merlin joined together to build up their business, particularly by expanding into other goods. In 1924, they began selling construction materials, building fixtures and fittings, and furniture—specializing in closeout factory liquidation items, which they could then sell at discounted prices. The new formula proved a success as well, attracting the region’s predominantly working class population. Before long, the company, still named Au Stock Américain, was able to cut out the middleman, and began purchasing directly from producers.

Au Stock Américain began hiring new employees, and required that all new employees begin as salespeople, in order to gain a thorough knowledge of the company’s business and customers. The company also continued to expand its range of products. An important new area of business was started in the 1920s when the group began selling prefabricated structures. Au Stock Américain quickly became known for its range of low-priced, prefabricated chalets, garages, and even banquet halls. By the end of the 1930s, the company had more than 50 employees.

World War II put the company’s growth on hold, however, as its stocks and truck fleet were requisitioned for the war effort. At the end of the war, the Leroy family was once again faced with rebuilding its business, and again turned to the surplus market. By the beginning of the 1950s, Au Stock Américain was again a flourishing business, selling not only building and construction supplies and prefabricated structures, but also providing carpentry and other artisan services. Later, the company also added the construction of complete houses to its operations as well. Joining Adolphe Leroy at this time were sons Bernard and Lionel, who set out to expand the company.

The Leroy family’s first expansion move was the opening of a branch store in the coastal village of Merlimont. The success of that store led the family to open a second branch store in Longueau in 1958. Two years later, the company reincorporated as a limited liability company, and changed its name to Leroy Merlin SA.

DIY Pioneer in the 1960s

In 1965, the company raised eyebrows with the purchase of an abandoned coal storage site and began converting it into a massive new store and headquarters. Completed in 1966, the new facility led the company to a new idea: that of a self-service store, a first for France. The new retail concept was an immediate success, and helped spark the growing DIY movement in France. As “bricolage” (the French term for self-assembly) grew to become something of a national pastime, Leroy Merlin began expanding, opening stores throughout France. The company also began adding more and more products to its shelves, reaching some 8,000 items in 1971, and extending to over 45,000 at the beginning of the 1980s.

The company’s success inspired competition, however. Leroy Merlin quickly found itself confronted by a growing number of competitors, including Castorama, founded in 1969, which was to become the company’s chief rival on the French market. Another strong source of competition came from the growing number of hypermarket groups, which began adding their own DIY retail concepts. At the same time, out-of-town shopping centers became an especially important growth area in the French retail market. Leroy Merlin fought back in the early 1970s, entering an agreement with grocery group GRO to combine forces and head off competition in their markets.

Although the relationship with GRO lasted just four years, Leroy Merlin grew strongly during the 1970s, reaching some 33 stores by decade’s end. Yet the company faced stiffening competition, not only in the retail scene, but also in its housing construction activities, where fast-rising land prices had put a crimp in the sector. The death of Adolphe Leroy in 1978, coupled with the company’s growing financial difficulties, forced the Leroy family to begin looking for new backing. In 1979, the company sold a 50 percent stake to Auchan, led by Gerard MuUiez, then in the process of building one of France’s top retail companies.

By 1981, with the accidental death of Bernard Leroy, Auchan had gained full control of Leroy Merlin, adding it to its stable of Auchan hypermarkets, Decathlon sporting goods, Boulanger appliances, and other retail formats. Under its new management, Leroy Merlin was refocused on the DIY market, shedding its furniture and kitchens departments. In 1983, Leroy Merlin abandoned its production of prefabricated chalets and other structures. The company continued to shut down its peripheral businesses during the 1980s, closing the carpentry operation in 1985 and ending housing construction in 1988.

If Leroy Merlin abandoned these sectors, it had not abandoned growth. By the end of the 1980s, the company’s retail network had expanded to 44 stores. The company had also successfully expanded the DIY concept into new areas, particularly that of home decoration—a sector that became a major force for the company’s sales growth throughout the 1990s.

International Home Decoration Leader in the 21st Century

At the end of the 1980s, Leroy Merlin took its first step into the international DIY market, when it opened its first store in Spain in 1989. That store’s success led the company to further expansion in the Spanish market. By the end of the 1990s, the company had opened 22 stores in Spain and become that country’s leading DIY and home decoration chain.

The success of its Spanish expansion led Leroy Merlin to look about for new international growth opportunities. In 1994, the company turned to Belgium, where it acquired the four-store Bricoman chain. These stores were converted to the Leroy Merlin format; by the end of the decade the company had added two new stores in Belgium. In 1996, the company turned to Eastern Europe, opening its first store in Poland. Meanwhile, Leroy Merlin had also extended into Italy, opening three stores there by the mid-1990s. The company’s Italian operations received a major boost in 1997, when Leroy Merlin acquired 30 Bricocenter stores in a 50-50 partnership with Italy’s Rinascente Group. While the largest of these stores were converted to the Leroy Merlin concept, the remaining smaller stores maintained the Bricocenter signage. In 1998, the company moved overseas, with the opening of the group’s first Leroy Merlin store in Brazil. By the end of 2002, the company had opened eight stores in Brazil.

Leroy Merlin accompanied its international expansion with continued growth in France, boosting the number of domestic stores to 69 by 1997, and to 79 by the end of the decade. Part of the group’s success was attributed to its commitment to innovation. In 1997, the company became one of the first to offer delivery and installation services, a sector that was to expand considerably by the dawn of the 21st century. Leroy Merlin also had recognized a shift in its customer base, as women became one of the driving forces of the DIY and home improvement sector. In response, the company was one of the first to reorient its stores to this market segment, emphasizing interior decoration categories, as well as its delivery and installation services.

Company Perspectives:

Mission: To adapt to the needs of our clients. Learning the lifestyles, wishes, needs, even if they are not expressed, and responding to them by doing everything necessary to satisfy the customer is a key feature of the company.

In 1999, Leroy Merlin went a step further, creating a new instore concept, Espace & Decoration, featuring textiles, flooring, and other accessories. In that year, also, the group branched out into a new retail segment, relaunching the Bricoman name as a hard-discount format geared toward the construction and home building segments.

In 2000, Leroy Merlin, under pressure from the acquisition by England’s Kingfisher of Castorama in 1998, attempted to expand into the United Kingdom, with a takeover bid for the Homebase DIY chain owned by the Sainsbury supermarket group. That bid failed, however. Instead, Leroy Merlin began looking about for an alternative takeover target in order to shore up its position at the top of the European DIY sector.

In the meantime, Leroy Merlin continued building its international network, and by 2002 the group operated nearly 200 stores worldwide. While France continued to represent the company’s core market, at some two-thirds of sales—which neared the EUR 4 billion mark—the company increasingly eyed international expansion. In 2000, the company began an ambitious expansion campaign in Poland, launching a program to build up to 20 new stores by 2005.

At the beginning of 2002, Leroy Merlin at last found its next acquisition target, when Belgium’s Groupe GIB decided to exit the retail DIY market, selling its Brico Belgium chain to the Netherlands’ Vendex. In turn, Vendex agreed to sell Brico Belgium’s southern European holdings, which included 38 Obi stores in France, and 20 Aki stores in Spain and Portugal. Although the purchase was held up by European monopolies commission inquiries, the Obi and Aki Portugal acquisitions were approved by February 2003. The Aki Spain acquisition faced tougher scrutiny, however, as Leroy Merlin had already gained a leading share in the Spanish market. Nonetheless, the company expected to complete the purchase by mid-2003.

With its European position solidified—the acquisition pushed Leroy Merlin to the top spot in France, the number two spot in Europe, and the number six position worldwide—the company now looked still farther abroad. In 2002, the company reached a joint venture agreement with China’s Homeway, which operated three large-scale DIY stores, bringing Leroy Merlin into that country. By 2003, the company had begun to finalize its expansion plans in that country, targeting 20 stores by 2005, primarily in the north of China, with the first stores slated to open by the end of 2003.

China was not the company’s only new target. In 2002, the company began plans to extend into Russia, and specifically with a first store in St. Petersburg. Meanwhile, closer to home, the company celebrated its extension into another new market—Paris, with the opening of the group’s first store in the French capital city. Leroy Merlin had come a long way since its army surplus origins, yet remained at the center of the French home improvement market.

Principal Subsidiaries

Obi (France); Aki (Spain and Portugal); Bricocenter (Italy); Bricoman (France).

Principal Competitors

Home Depot Inc.; Saint-Gobain Building Distribution Ltd.; But SA; SA Castorama Templemars; Bricorama SA; Point P SA; Comasud SA; Mr Bricolage SA; Schlecker SA; Black & Decker Italia SpA; Ferramentas Gerais Comercio e Importação S.A.

Key Dates:

1921:: Adolphe Leroy and son, Adolphe, open a store in Noeux les Mines selling army surplus, called Au Stock Américain.
1923:: The younger Leroy takes over the surplus store.
1924:: Au Stock Américain begins selling closeout and liquidated goods, then extends into building and construction materials and fittings; later the company adds furniture and prefabricated housing.
1950:: Adolphe Leroy’s sons join the company, which begins to expand with the first branch store in Merlimont.
1958:: A third branch store is opened in Longueau.
1960:: The company changes its name to Leroy Merlin.
1966:: The company inaugurates a new large-scale, self-service store.
1979:: Auchan acquires 50 percent of Leroy Merlin.
1981:: Auchan acquires full control of Leroy Merlin, ends furniture and kitchens sales; Leroy Merlin refocuses entirely on the DIY and home improvement market during the 1980s.
1989:: The first international Leroy Merlin store opens in Spain.
1994:: The company acquires Belgium’s Bricoman network.
1997:: The company reaches a joint venture agreement with Rinascente to acquire 30 Bricocenter stores.
1999:: The company relaunches the Bricoman concept as a hard-discount format oriented to construction and building markets.
2000:: The company announces plans to build 20 new stores in Poland by 2005.
2002:: The company acquires 38 Obi and Aki stores in France, Spain, and Portugal from Vendex.
2003:: The company announces plans to build 20 stores in China by 2005.