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2013 saw a boost to the housing market as mortgage lending improved and house prices rose in some geographical regions, helped in part by the UK Government’s Help to Buy mortgage scheme. Despite these positive developments DIY retailers remained cautious
The UK DIY market has experienced tough trading conditions in recent years, compounded by the recession-induced fall in discretionary spending and the weak housing market. Verdict data suggests that the sector value fell from a high of £ 9.76 bn in 2004 to £ 7.54 bn in 2012, and Mintel research indicates that between 2008 and 2012 the DIY market declined by eleven per cent; a figure it believes to represent approximately £ 1.3 bn in annual sales.
Between December 2012 and November 2013, GfK data shows that the market value for DIY increased by 3.4 per cent to £ 10.5 bn; a figure not dissimilar to that proffered by Mintel analysts, which suggest that the sector grew by five per cent during the year.
Interestingly, these forecasts differ significantly to those indicated in mid 2013 by Verdict, which predicted that the DIY sector would contract by 0.6 per cent; a 20.2 per cent decline from 2008, and what would have been the sixth consecutive year of decline within the market.
Irrespective of analyst forecasts, 2013 saw a boost to the housing market as mortgage lending improved and house prices rose in some geographical regions, helped in part by the UK Government’s Help to Buy mortgage scheme. Despite these positive developments DIY retailers remained cautious, with Kingfisher's CEO Sir Ian Cheshire advising in September 2013 that he had yet to see an uplift in sales and did not expect to do so until six to nine months in the future.
Furthermore, Lord Wolfson, the CEO of the Next retail chain which opened its first Home & Garden format stores in 2012, warned that although the housing market revival had the potential to cause a “house price bubble” that would impact negatively on the economy when interest rates rise, adding: “The housing market could go one of two ways. If the increase in transactions leads to house building that would be fantastic and means there are long-term growth prospects for home furnishing businesses. If it’s just house price inflation, at some point there’s going to be an accident.”
The UK benefited from long periods of favourable weather during the second quarter of 2013, following protracted cold weather during the first quarter which saw footfall drop by more than five per cent in March as the freezing conditions put consumers off visiting retail stores. The 2013 Easter trading period fell in March rather than April, and saw the coldest Easter Sunday on record in the UK, impacting upon year-on-year DIY and garden related sales by -14.8 per cent and -45.4 per cent respectively, according to Barclaycard data.
In 2012 the three key players in the market began to reveal plans to reduce store space by as much as 30 per cent each, as it became clear that their large store portfolios were unsustainable. While Homebase has confirmed plans to close stores, B&Q has elected to sub-let space to British supermarkets, including Asda and Morrisons. However, sub-letting is not without its challenges and Sir Ian Cheshire has been open about the difficulties in obtaining planning permission and approval from landlords, stating that it could take “a long time” to achieve the size of the estate Kingfisher wants, adding, “It’s not going to be a quick fix because we don’t have a mountain of lease expiries.”
Kingfisher (B&Q and Screwfix):
Kingfisher's UK and Ireland operations saw a sales increase of 2.7 per cent (+1.1 per cent on a like-for-like basis) reaching £ 4,363 mio in 2012/2013. Once again, Screwfix was the UK success story, reporting a sales increase of 17.6 per cent (+7.3 per cent on a like-for-like basis) to £ 665 mio. A strong promotional programme, extended opening hours, new outlets and the successful introduction of a mobile ‘Click, Pay & Collect’ offer were cited as key drivers of performance.
B&Q UK and Ireland's sales rose by just 0.4 per cent (0.1 per cent on a like-for-like basis) to £ 3,698 mio, impacted by continued investment in stores and related infrastructure. B&Q's trade only brand TradePoint reportedly saw a seven per cent increase in sales, supported in part by the launch of the UK Enterprise Finance Guarantee scheme for tradesmen.
In January 2013 B&Q's Irish business entered into an Examinership process which concluded in May with the closure of one store. Significant reductions in rental costs were achieved for the remaining stores and the business broke even during the second half of the financial year.
In October 2013 Kingfisher announced an overhaul of the senior management team which saw the departure of B&Q chief executive Martyn Phillips, and the appointment of Kevin O’Byrne to the role of chief executive of the B&Q and Koçtaş brands. Going forward into 2014, Kingfisher advised that it was to continue investing in B&Q's stores and infrastructure, and would seek planning permission for further retail partnerships in a bid to 'right-size' its UK portfolio.
Homebase:
Sales at Home Retail Group’s Homebase chain increased by 4.1 per cent to £ 1,489 mio (5.9 per cent on a like-for-like basis) in 2013, while operating profit increased by 71 per cent to £ 18.9 mio. The growth followed a challenging 2012, in which Homebase adopted a new strategy to position itself as a “clearly differentiated multi-channel home enhancement retailer, creating both a store and online experience, with a softer, more stylish female-friendly proposition”.
A successful branch re-fit in Aylesford in 2011 paved the way for the new format Homebase stores which feature help and advice centres along with Laura Ashley and Habitat brand concessions. With an ambiance more akin to a department store than a traditional DIY retailer, Homebase was well on the way to differentiating itself from its competitors and, by September 2013, had refitted fifteen branches at a cost of £ 1 mio each, with more planned for the following year.
In late 2013 Homebase MD, Paul Loft, advised that the retailer was looking to expand its service offer, using a combination of contractors and retrained store staff to provide home design, decorating and flooring installation. He admitted that offering services was not highly profitable, but said: "We get to sell product and win customer loyalty" adding: "We are taking on the specialists."
Wickes:
During 2013 the consumer division of Travis Perkins plc (including Wickes, Tile Giant and Toolstation) reported an increase in turnover of 2.4 per cent (1.0 per cent LFL) to £ 1,180 mio, although profit for the segment declined by 2.7 per cent as a result of significant investment in pricing and promotional offers, including the 'Red Pencil Pricing' price reduction programme. The closure of the retailer's loyalty card scheme also helped mitigate the impact of the investment, and the business focused on the reduction of operating costs and improvements in sourcing.
Poor weather conditions contributed to a decline in first half revenue for Wickes although trading did improve as the year progressed, rising 8.6 per cent in May/June compared with the same months in 2012.
An improved housing market combined with a reduction in unemployment and declining inflation have all contributed to an increase in consumer confidence – which rose out of negative territory in June 2014 – and is expected to form the basis for an increase in DIY expenditure during 2014. Retailers will no doubt be hoping that the pent-up demand which has built during the downturn will have a positive impact on big ticket sales, such as kitchens and bathrooms, although many analysts believe that it is the builders’ merchants that will see the benefits before the pure DIY retailers.
Between December 2012 and November 2013, GfK data shows that the market value for DIY increased by 3.4 per cent to £ 10.5 bn; a figure not dissimilar to that proffered by Mintel analysts, which suggest that the sector grew by five per cent during the year.
Interestingly, these forecasts differ significantly to those indicated in mid 2013 by Verdict, which predicted that the DIY sector would contract by 0.6 per cent; a 20.2 per cent decline from 2008, and what would have been the sixth consecutive year of decline within the market.
Irrespective of analyst forecasts, 2013 saw a boost to the housing market as mortgage lending improved and house prices rose in some geographical regions, helped in part by the UK Government’s Help to Buy mortgage scheme. Despite these positive developments DIY retailers remained cautious, with Kingfisher's CEO Sir Ian Cheshire advising in September 2013 that he had yet to see an uplift in sales and did not expect to do so until six to nine months in the future.
Furthermore, Lord Wolfson, the CEO of the Next retail chain which opened its first Home & Garden format stores in 2012, warned that although the housing market revival had the potential to cause a “house price bubble” that would impact negatively on the economy when interest rates rise, adding: “The housing market could go one of two ways. If the increase in transactions leads to house building that would be fantastic and means there are long-term growth prospects for home furnishing businesses. If it’s just house price inflation, at some point there’s going to be an accident.”
The UK benefited from long periods of favourable weather during the second quarter of 2013, following protracted cold weather during the first quarter which saw footfall drop by more than five per cent in March as the freezing conditions put consumers off visiting retail stores. The 2013 Easter trading period fell in March rather than April, and saw the coldest Easter Sunday on record in the UK, impacting upon year-on-year DIY and garden related sales by -14.8 per cent and -45.4 per cent respectively, according to Barclaycard data.
In 2012 the three key players in the market began to reveal plans to reduce store space by as much as 30 per cent each, as it became clear that their large store portfolios were unsustainable. While Homebase has confirmed plans to close stores, B&Q has elected to sub-let space to British supermarkets, including Asda and Morrisons. However, sub-letting is not without its challenges and Sir Ian Cheshire has been open about the difficulties in obtaining planning permission and approval from landlords, stating that it could take “a long time” to achieve the size of the estate Kingfisher wants, adding, “It’s not going to be a quick fix because we don’t have a mountain of lease expiries.”
Kingfisher (B&Q and Screwfix):
Kingfisher's UK and Ireland operations saw a sales increase of 2.7 per cent (+1.1 per cent on a like-for-like basis) reaching £ 4,363 mio in 2012/2013. Once again, Screwfix was the UK success story, reporting a sales increase of 17.6 per cent (+7.3 per cent on a like-for-like basis) to £ 665 mio. A strong promotional programme, extended opening hours, new outlets and the successful introduction of a mobile ‘Click, Pay & Collect’ offer were cited as key drivers of performance.
B&Q UK and Ireland's sales rose by just 0.4 per cent (0.1 per cent on a like-for-like basis) to £ 3,698 mio, impacted by continued investment in stores and related infrastructure. B&Q's trade only brand TradePoint reportedly saw a seven per cent increase in sales, supported in part by the launch of the UK Enterprise Finance Guarantee scheme for tradesmen.
In January 2013 B&Q's Irish business entered into an Examinership process which concluded in May with the closure of one store. Significant reductions in rental costs were achieved for the remaining stores and the business broke even during the second half of the financial year.
In October 2013 Kingfisher announced an overhaul of the senior management team which saw the departure of B&Q chief executive Martyn Phillips, and the appointment of Kevin O’Byrne to the role of chief executive of the B&Q and Koçtaş brands. Going forward into 2014, Kingfisher advised that it was to continue investing in B&Q's stores and infrastructure, and would seek planning permission for further retail partnerships in a bid to 'right-size' its UK portfolio.
Homebase:
Sales at Home Retail Group’s Homebase chain increased by 4.1 per cent to £ 1,489 mio (5.9 per cent on a like-for-like basis) in 2013, while operating profit increased by 71 per cent to £ 18.9 mio. The growth followed a challenging 2012, in which Homebase adopted a new strategy to position itself as a “clearly differentiated multi-channel home enhancement retailer, creating both a store and online experience, with a softer, more stylish female-friendly proposition”.
A successful branch re-fit in Aylesford in 2011 paved the way for the new format Homebase stores which feature help and advice centres along with Laura Ashley and Habitat brand concessions. With an ambiance more akin to a department store than a traditional DIY retailer, Homebase was well on the way to differentiating itself from its competitors and, by September 2013, had refitted fifteen branches at a cost of £ 1 mio each, with more planned for the following year.
In late 2013 Homebase MD, Paul Loft, advised that the retailer was looking to expand its service offer, using a combination of contractors and retrained store staff to provide home design, decorating and flooring installation. He admitted that offering services was not highly profitable, but said: "We get to sell product and win customer loyalty" adding: "We are taking on the specialists."
Wickes:
During 2013 the consumer division of Travis Perkins plc (including Wickes, Tile Giant and Toolstation) reported an increase in turnover of 2.4 per cent (1.0 per cent LFL) to £ 1,180 mio, although profit for the segment declined by 2.7 per cent as a result of significant investment in pricing and promotional offers, including the 'Red Pencil Pricing' price reduction programme. The closure of the retailer's loyalty card scheme also helped mitigate the impact of the investment, and the business focused on the reduction of operating costs and improvements in sourcing.
Poor weather conditions contributed to a decline in first half revenue for Wickes although trading did improve as the year progressed, rising 8.6 per cent in May/June compared with the same months in 2012.
An improved housing market combined with a reduction in unemployment and declining inflation have all contributed to an increase in consumer confidence – which rose out of negative territory in June 2014 – and is expected to form the basis for an increase in DIY expenditure during 2014. Retailers will no doubt be hoping that the pent-up demand which has built during the downturn will have a positive impact on big ticket sales, such as kitchens and bathrooms, although many analysts believe that it is the builders’ merchants that will see the benefits before the pure DIY retailers.
