Compared with last year’s buoyant January Sales performance, the momentum appears to have slowed in the furniture sector.
Furniture retailers, which have been sitting pretty amid a big-ticket sales revival over the past few years, are experiencing comparatively softer sales during the busy January peak this year, and are warning of “tougher” trading ahead.
Dreams chief executive Mike Logue, who brought the beds specialist back from the brink of collapse in 2013, told Retail Week its January Sale got off to a “great start”, before “backing-off a touch”.
As the New Year is a “key time to replace mattresses”, Dreams typically generates around 20% of its sales in January alone.
“It’s challenging out there. The market is definitely tougher, so I don’t expect double-digit growth by the end of the month”
Mike Logue, Dreams
“It’s a massive part of the year for us, and it got off to a great start. We had three of our biggest trading days in history at the beginning of the Sale, partly down to where trading days fell over Christmas, but this is likely to even out.”
Logue explains that sales traffic “backed off a touch” in the second week.
“It’s challenging out there. The market is definitely tougher, so I don’t expect double-digit growth by the end of the month.
“I wouldn’t say it has been amazing, but we’re happy,” he says.
Oak Furniture Land founder and managing director Jason Bannister says sales in December grew 24% year-on-year – exceeding the retailer’s target by 6%.
“Early signs showed a buoyant start to our Sale too,” he adds.
Bannister says the momentum continued into January and brought the largest trading day in the company’s history.
However, due to the way the holidays fell, Boxing Day was “quieter than previous years”.
A resilient sector
Looking ahead to another year in the furniture sector, DFS chief executive Ian Filby appears confident.
“The sofa market has proven to be relatively resilient, unless there are major shocks in consumer confidence or other economic indicators”
Ian Filby, DFS
“The sofa market has proven to be relatively resilient, unless there are major shocks in consumer confidence or other economic indicators,” he says.
Indeed, the last “truly dismal years” in the furniture sector were 2010 and 2011, according to Retail Week Prospect senior analyst Philip Wiggenraad.
During this time, DFS, IKEA, ScS and Furniture Village reported sales declines across the board, and retailers including Habitat, Lombok, Homeform and Easy Living collapsed.
“Some of the things that were going on at the time were high inflation, very low wage growth that wasn’t keeping track with inflation and a stagnant property market.
“It could be argued that we might be heading for those conditions, and furniture retailers may need to brace themselves if that does play out,” Wiggenraad warns.
While a repeat of the downturn is not anticipated, DFS’s Filby warns that “given the impact of the EU referendum result on the US dollar exchange rate, the industry does have a cost inflation challenge to manage this year”.
To what extent retailers will need to hike prices and how this will impact sales is yet to be seen, but prices are expected to increase across the board.
Last month, both Carpetright and ScS told Retail Week they would be forced to marginally increase prices.
“Consumer demand remains uneven; the market is extremely competitive and the impact of currency movements have combined to give us substantial trading headwinds,” said Carpetright boss Wilf Walsh as profits dropped 42%.
Homewares retailer Dunelm also revealed it will put prices up this year, but “it will be done slowly, over time”, insists boss John Browett.
Filby is less concerned about the impact of volatile consumer confidence on the market, however.
“We have so far seen consumer confidence remaining relatively unaffected, and while this trend continues we remain optimistic about the growth of the furniture market”
Ian Filby, DFS
“We have so far seen consumer confidence remaining relatively unaffected, and while this trend continues we remain optimistic about the growth of the furniture market,” he says.
But, according to figures from GfK, consumer confidence has undulated since the Brexit vote last June and is yet to recover to pre-referendum levels.
At last week’s quarterly update, Topps Tiles boss Matthew Williams told Retail Week that, along with a drop in housing transactions, reduced consumer sentiment has started to soften the market.
The jury is still out on how both price increases and continued uncertainty will impact big-ticket purchasing decisions in the coming months.
But it seems the furniture category – bolstered of late by pent-up demand for big-ticket purchases stored up since the downturn – could soon reach the end of its winning streak.