Nick Bubb's verdict: B&Q can't always rely on the weather

B&Q has at last had the right weather recently to shift its seasonal ranges, but who is best placed to benefit from a pick-up in the UK housing market?

When I last wrote about Kingfisher at the end of May, it was looking as if the weather was never going to be right for B&Q’s ‘outdoor ranges’ and after suffering from a cold winter and a cold spring, chief executive Ian Cheshire seemed to be only ever talking about the weather.

But his ‘sun-dance’ paid off and yesterday’s second quarter update revealed that the recent heatwave had delivered bumper sales of barbecues, garden chairs and hosepipes for B&Q.

B&Q didn’t do so well with sales of indoor DIY products in the 10 weeks to July 13, as total sales were only up by 1.9% like-for-like. But sales of outdoor and seasonal products were up by nearly 20%, representing almost 40% of total sales.

An old friend at Kingfisher always used to say that seasonal ranges would always sell out, but that you could never tell when they would sell and at what price. Though the bad start to the season must have tested his confidence, he has in the end been proved right again.

But all boats float on the same tide and, although we haven’t yet heard how B&Q’s great rival Homebase has done recently, today’s interim results from two of the key trade suppliers, Travis Perkins and Howden, have helped to put things in perspective and underline how the market is gradually shifting, because Travis Perkins and Howden are trading just as well as B&Q, if not better.

The builder’s merchant Travis Perkins (which is a FTSE 100 index constituent now) has a market cap of as much as £4.2bn, so it is a major force in the market, albeit mainly through wholesale rather than retail channels.

Back on May 16 the IMS for the four months to end-April from Travis Perkins was downbeat in tone, despite improving sales in April and early May. Overall sales were running 1.8% down like-for-like, with the consumer division (mainly Wickes) 6.1% down. But after a strong May and June (which saw Wickes’ sales alone up by 8.6%) Travis Perkins is in more bullish mood today, with the lead indicators for UK construction output and housing activity trending more positively.

It’s easy to forget about Howden Joinery, but its shares have also been great performers recently and its market cap is now up to £1.8bn, amazingly, so it has certainly left its old MFI legacy well behind. The core business has a great model, focused on the trade customer in secondary locations, with strong and motivated staff. And trading is very solid at Howden, with sales up 7.6% over the latest four weeks according to today’s update with the interim results.

Now Wickes and Howden are more ‘heavy end’ and indoor-focused than B&Q or Homebase, so the recent hot weather hasn’t necessarily been in their favour, but the fact that they have also been trading well says a lot about their focus on the trade customer.

Everyone has their own view of ‘white van man’, but in the street where I live there are certainly an awful lot of white vans scurrying around as various home improvement projects start and finish and builders come and go.

But the local builders aren’t popping down to their local B&Q or Homebase to get their bricks and cement and timber, although I have seen the odd Screwfix delivery van in the area delivering various tools (Screwfix being B&Q’s fast growing sister company), while people wanting a new fitted kitchen installed increasingly seem to trust their builder to get one from good old Howden.

The buoyancy of the London housing market remains one of the great mysteries of the modern world, but the Goverment is clearly intent on doing its very best to stoke some sort of pre-election boom, via the provision of easier mortgages and credit deals, and is leaning heavily on the poor old Bank of England to guarantee that interest rates will stay artificially low for the next couple of years.

After the election interest rates will surely have to go up and the next Government will inherit quite a mess, but in the meantime the wealth effect of rising house prices is doing its bit to boost consumer confidence, from London outwards.

The problem for B&Q is that it can’t rely on the weather always being helpful and so it has to press on with the task of making its business much more trade-focused and cutting its excess store numbers, as any increase in the number of house moves seems likely to benefit the Do It For Me trade market rather than the traditional DIY market.

• Nick Bubb has been a leading retailing analyst for over 30 years. He is a well-known commentator on UK retailing and is a founder member of the influential KPMG/Ipsos “Retail Think-Tank”.