What do the UK’s biggest home improvement retailers think about the trouble swirling in a market that closely mirrors the fortunes of their own?
As we’ve heard daily for the last three years, these are tough times. Consumer caution is playing out in almost every market but one that could create untold havoc is the trouble brewing in property.
We’re facing what has been described as a “slow puncture” in house prices. In July, they fell at the fastest annual rate in 14 years and, as expected, this month the annual price change dropped further to -0.4%. Buyers are opting for smaller properties they can more safely afford and the number of house sales agreed in August fell 18% on the same period last year.
If a wedge of your turnover relied on people ripping out and replacing the kitchens and bathrooms of their new house, these kinds of headlines might be making you nervous. So what do the UK’s biggest home improvement retailers think about the trouble brewing in a market that closely mirrors their own?
Troubles abroad
Despite a sales performance that was “slightly ahead of expectations”, B&Q and Screwfix-owner, Kingfisher this week slashed its full-year profit guidance from £634m to £590m.
The DIY giant cited harsh trading conditions for its first-half results. Total sales edged down 1% to £6.88bn and like-for-likes slipped 2.2% but this was primarily down to a rocky performance in its overseas markets. Like-for-like sales in France fell 3.8% and in Poland, they dropped 10.9%. They rose 1.7% in the UK and Ireland.
In fact, despite the headlines worrying Britain’s property owners, Kingfisher’s kitchen and bathroom results have been remarkably resilient: up 1.9% in Q1 and 3.8% in Q2. Chief executive Thierry Garnier said he has a “pretty good order well” for the segment even now.
“We are reading the newspapers and thinking about the future, just like you, but today we continue to see pretty healthy consumer sentiment in the UK,” said Garnier.
”Overall, we still have demand for core and big-ticket categories. Importantly, we were pleased to see an improving volume trend in those categories.”
Home-owning democracy
Over at Wickes, chief executive David Wood told Retail Week he is also keeping a close eye on the housing market. But in its results last week, the retailer posted a record first half, with sales growing 0.7% to £827.7m – driven mostly by sales of its kitchen and bathroom showroom business.
“In terms of real significant change on behalf of customers, we’re not quite seeing that come to fruition yet. I don’t know how this is going to play out but we will remain nimble and agile around the opportunity in the market,” said Wood.
“On DIY, customers are thinking a bit more about the affordability of what they can do and we see that. But the other thing to bear in mind is that we are a property-owning democracy. Two-thirds of the homes in the UK are owner-occupied and we have the oldest and most inefficient housing stock in Europe – so there is constant demand for repair, maintenance and improvement.
“If you think about it like this: there are 30 million homes in the UK and Ireland. But in actual fact, within that 30 million, over 20 million are owned and more than 10 million are owned outright. In terms of the number of people who need to renew their mortgages, it’s around 1.1 to 1.2 million a year, out of 30 million homes, and most people are actually on long-term mortgages at the moment. So I’m curious as to when we bring all of these facts together, how some of this stuff starts to play out.”
Trade triumphs
What illustrates that point most is perhaps the strength of the trade sales coming through both Kingfisher and Wickes’ tills.
Wickes has reported “really strong demand” from the segment. Its professional tradesperson membership TradePro has seen double-digit sales growth and the number of traders has increased 17%.
B&Q’s TradePoint may have struggled, like-for-likes are down 1.8%, but this was said to be mainly down to removing instant vouchers during promotions. However, Screwfix delivered total sales growth of 9.2% and like-for-like sales grew 3.1%
The UK’s home improvement professionals look set to remain busy with many of Wickes’ trade shoppers saying their pipeline of work spans a year. Kingfisher’s monthly survey of its professional customers found 90% are currently working and 80% said there’s more work to come.
This indicates that there are still many homeowners in the UK who feel financially comfortable enough to spend on a new kitchen or bathroom and are prepared to pay to get the work done for them, too.
“Our kitchen and bathroom showroom business grew 6% In the first half,” said Wood.
“But we do have a slightly more resilient customer. I think the market is large because our customer tends to be slightly older, slightly more affluent and they tend to own their home; so in the current economic climate, they’re really just spending from savings and that gives us a good bit of growth.”
It’s clear that Kingfisher is not being rattled by tabloid headlines about the housing market either.
Garnier said: “Over 50% of Kingfisher sales are from repair and maintenance, so even though our business is linked to housing transactions, in fact, we are largely insulated from it.
“Housing transactions are down but last year was a radiant, outstanding year, so we need to look at housing transactions versus 2019. I remember 18 months ago, when we were predicting issues on the property market, and yet we still continue to see a relatively healthy consumer.”
No comments yet