After a phenomenally busy period when everybody became Handy Andy or Andrea and painted the walls rather than climbed them during the depressing days of lockdowns, things are looking trickier as the consumer mentality shifts from DIY to done-IY.
That was signalled this week as 80-store Tile Giant was put through a pre-pack administration.
The retailer’s joint administrator, Neil Morley of Interpath Advisory, observed: “While retailers specialising in DIY and home improvement enjoyed a period of growth during the pandemic, the squeeze on disposable income caused by the current cost-of-living crisis is now starting to place significant pressure on cash flow.”
But does Tile Giant’s administration really signal a wider DIY downturn?
It is undoubtedly the case that the wider home enhancement market’s growth rate has slowed. B&Q and Screwfix owner Kingfisher, for instance, reported late last year that in the third quarter, to October 31, its UK division’s like-for-likes slipped 2.3% and total sales were flat year on year. It trimmed profit expectations. However, sales were also up 13% on the pre-pandemic level.
“Tile Giant had specific problems of its own that mean its administration may not mirror the experience of the wider market”
Topps Tiles posted a 10% increase in sales in its first quarter but much of that growth was put down to the comparative period being prior to the acquisition of Pro Tiler Tools.
Tile Giant had specific problems of its own that mean its administration may not mirror the experience of the wider market.
Only a month before the grouting fell off, former Topps Tiles chief executive Matt Williams’ Stiled Holdings acquired Tile Giant.
It emerged this week, the administrators said, that after a review of the business the new owners “determined that there was a greater funding requirement than had been initially anticipated. In addition, the level of creditor pressure experienced by the company was increasing, with a number of creditors beginning to take action in relation to unpaid arrears and reducing their credit terms.”
An “accelerated sales process” followed but ultimately the directors decided to appoint administrators and then took back the bulk of the business through a pre-pack.
Risk management
That might prompt questions about the extent of due diligence undertaken ahead of taking control of Tile Giant but it should not necessarily be seen as an indication that the DIY sector is inexorably heading into the red – even though conditions may be more challenging.
Tile Giant is not quite a single-category business – you can buy laminate flooring, if you like – but it has neither the specialist dominance nor the breadth of product and scale to protect it that competitors command.
It is understood Tile Giant was hit by a downturn in big project work as the cost-of-living crisis hit. Its most direct rival, Topps, on the other hand, has broadened its operations into pureplay propositions and a B2B arm to supply architects and contractors so risk is spread.
“Harsher conditions mean competition will be all the more ferocious. As always, the advantage lies with the retailers with the greatest presence and scale”
Bigger DIY groups such as Kingfisher and Wickes are protected by the wide-ranging nature of their businesses, spanning all sorts of product categories, and the associated scale that opens the door to efficiencies and savings in fields such as buying.
The tile market is also highly fragmented. For example: market leader Topps’ ambition is to account “for £1 in every £5 spent on tiles and associated products in the UK by 2025”.
One thing going in favour of Tile Giant is the involvement of Williams who brings long experience from Topps. But the challenge looks like one for him and his business more than the wider market. For DIY groups it may no longer be boom, but it won’t be bust.
Harsher conditions mean competition will be all the more ferocious. As always, the advantage is likely to lie with the retailers with the greatest presence and scale. Anecdotally, it seems that although many big retailers had a better-than-expected Christmas, many smaller ones had a harder time – and, with less room for manoeuvre as a result of their scale, that will continue.
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