Against an uncertain backdrop, updates from ScS, Topps Tiles, DFS and Made.com have given a vital temperature check on the health of the home and furniture sectors.
Here’s what some of retail’s big-ticket bosses had to say about the current state of play.
Trading has been worse than expected
A slowdown in housing transactions during the period put a crack in the tile specialist’s sales, as did a post-election dip in consumer confidence.
Although the adage ‘if people don’t move, they improve’ is true, Topps Tiles boss Matt Williams says that staying put can impact average transaction value.
“When people move they usually tile multiple rooms, which leads to bigger transactions. When they stay put and improve, they tend to fix up a single room,” he explains.
“When people move they usually tile multiple rooms, which leads to bigger transactions. When they stay put and improve, they tend to fix up a single room”
“Looking back now, I think there was an over-exuberance in the first half and a sort of ‘take breath’ in the second half”
DFS chief executive Ian Filby
DFS chief executive Ian Filby goes as far as to describe the past 12 months as “a year of two halves”.
“We had a tough second half, as did an awful lot of other big-ticket-item retailers, particularly from March to June,” he says.
He puts this down to a cocktail of factors – the late falling of Easter, the snap election and the weather – which conspired to knock trade.
“Looking back now, I think there was an over-exuberance in the first half and a sort of ‘take breath’ in the second half,” Filby adds.
But things are looking up
Although retailers will take a prudent view on market conditions going forward, those that updated last week have pointed to signs of improvement.
Sofa and flooring retailer ScS reported a 0.7% dip in full-year like-for-like order numbers last week. However, it said that in the past nine weeks, order intake rose 3%.
Filby also claims that after a “strange period”, the market has settled at small single-digit declines – the level it had anticipated for this year and next.
“Anything the Government can do to get people moving more would be welcomed, and clearly progress in terms of Brexit would be helpful, but we’re not hanging about for any of this stuff”
Topps Tiles boss Matt Williams
“In this environment, we’re anticipating being able to drive profit growth for the company in this financial year while keeping the foot fully on the investment accelerator,” he says.
Topps Tiles’ Williams agrees that there was a modest improvement in market conditions during its fourth quarter – the 13 weeks to September 30 – when like for likes slipped 3% compared to the 4.7% decline it suffered in the prior quarter.
“We recovered from the initial Brexit vote quite strongly and then that recovery waned. But we’ve seen a small recovery since then,” Williams says.
“It still feels a little fragile but I think the consumer will normalise to the environment over time.”
Analysts Cantor Fitzgerald, however, is not convinced and has consequently reduced its forecasts.
Its director of general retail research Mark Photiades says that trading at Topps did improve but “not as strongly as hoped, despite softening comparatives”.
According to GlobalData, the UK furniture market is expected to return to growth in 2018 following an expected decline in 2017.
It forecasts the market will increase in value by 10.2% by 2022 and predicts the flooring market will grow 6.8% over the same period.
Value credentials not to be sniffed at
Sunderland-based ScS kicked the week off with a reassuring pre-tax profit increase of 10%, which the retailer put down to “choice, value and quality” as well as its customer service.
“Sometimes in a difficult environment people trade down,” adds ScS boss David Knight.
This chimes with comments from value giant B&M, which has claimed that the downturn in consumer confidence has worked to its advantage as strapped shoppers seek out a bargain.
However, this contrasts with shopping trends observed at Topps Tiles.
“The sight decline in average transaction value has nothing to do with shoppers trading down,” says Williams.
“If anything we’re seeing the opposite. Customers are being more adventurous and like where we’re going with our product development.”
Filby agrees, arguing that there’s ample demand at both ends of the scale.
“Customers are looking for value and great opening price points, but similarly there’s a whole raft of people looking to get value at the other [higher price] end.”
DFS enjoyed 20% year-on-year growth in its premium brands.
Self-help is key
One thing that all in the big-ticket sector agree upon is that rather than waiting for the Government to issue reassurances and bolster consumer confidence, retailers need to be proactive and work harder to achieve sales.
Delighting customers and being rigorous with cost control is how, Filby says, the strong will survive in the next couple of years.
Williams echoes this sentiment: “Anything the Government can do to get people moving more would be welcomed, and clearly progress in terms of Brexit would be helpful, but we’re not hanging about for any of this stuff,” he says.
“We’re very keen on self-help and we’ve made some great progress amid the tough trading conditions – entering into the commercial tile market, launching a new small-store format and making strides with our people agenda.”
There may be evidence of the big-ticket market settling now; however, with Brexit looming large, there may still be trouble ahead.