Analysis: Is a slowdown in-store for home retailers?

Dunelm posted flat like-for-likes in the 13 weeks to December 31, and warned of tougher times ahead.

“I don’t think it was a banner Christmas for us, but it was fine,” Browett tells Retail Week. 

“In the run-up to the big day we did really well because we had lots of nice Christmas stock, but the quarter overall got off to a slow start.”

Browett says that was partly down to an “issue with the new depot”, which cost the business £4m, but also notes the market has been “a little bit soft”.

“That’s not helped,” he admits, “but it’s fine. We got through it.”

Tough market 

Likewise, Topps Tiles posted an uncharacteristically downbeat quarterly update.

The tile specialist’s like-for-likes edged up marginally – 0.3% – in the 13 weeks to December 31, but that figure was flattered 0.6% by an additional trading day.

As a big-ticket retailer, Topps’ performance gives a strong indication of the health of the home and DIY market, which Williams describes as “tough”.

Williams tells Retail Week that Topps Tiles’ quarterly sales were impacted by changes in the housing market and consumer confidence.

“After a big spike in housing transactions last March, brought on by changes in stamp duty on second homes, transactions have fallen back, which isn’t particularly helpful to us,” he says.

“Then consumer confidence was pretty subdued in the quarter.

”This seems to be linked to the Brexit result and customers having lots of worrying headlines coming through in the media.”

Health of homewares

The same may also be said of the homewares market, which Browett says started to decline after the Brexit vote. 

”We’ve seen softness all year. Basically, from Brexit onwards, the market has been slightly negative. It’s usually a bit positive, so that’s been hard.

”But it’s nothing really serious; we’re talking 1% or 2%,” he clarifies. 

Browett thinks trading across the industry was softer last year, compared with 2015.

“It’s nothing like a recession, but it’s hard trading out there, coupled with a continuing trend towards leisure and eating out. The electricals and clothing sectors are slightly negative too.”

What lies ahead?

“Where it goes from here is difficult to tell. There’s still a lot of uncertainty,” says Williams.

This view is seconded by Browett: “Who knows? It’s hard to tell.”

However, Williams is confident consumer sentiment will pick up. “As time goes on, consumers are becoming increasingly resilient to the messages around the Brexit fallout.

“Every time we realise the world hasn’t come to an end, the less people are scared by the media messaging surrounding Brexit,” he says.

Williams argues that the biggest issue for retailers is exchange rates and how that will impact the price of goods.

He says that, although he doesn’t see this year being abnormal in terms of pricing at Topps, it will be interesting to see how inflation plays out across the board.

“How customers react to price increases is yet to be seen,” he adds.

Browett, who predicts market softness will continue into the year, agrees that inflation will begin to feed through.

However, he does not see that making a dramatic difference to retailers in general.

“I think most of it will get passed through. In a normal year, we wouldn’t even be talking about it,” he says.

Browett insists that, at Dunelm, “prices won’t go up in a way that people would notice”.

“Prices will go up a little bit,” he admits, “but it will be done slowly, over time.”

Not all doom and gloom 

Despite slowing markets and volatile consumer confidence, both Topps and Dunelm claim to be well placed to mitigate the incoming headwinds. 

Williams is positive because the macro-drivers that determine big-ticket purchases – employment and income – “remain strong”.

Insisting that 2017 presents not doom and gloom for the business, but “an opportunity”, Williams says: “This year is not going to look anything like 2008. We’ve not fallen out of love with our homes.”

Dunelm, which is investing and developing across a number of fronts, is also not deterred by the health of the market. 

 “If anything, if we thought the market was going to slow down more, we’d go even faster.

 “Online, we’ve got a huge amount to do, with the [recently acquired etailer] Worldstores integration and launching lots of new things there. We’ll also continue to roll out new-format stores,” Browett says.

As Williams concludes: “Retailers can only do their best in the market conditions in which they find themselves.”