Rumblings from the governor of the Bank of England, Mark Carney, that he is already “concerned” the country is heading for another real estate bubble may be hard to square in the boardroom of Carpetright
Rumblings from the governor of the Bank of England, Mark Carney, that he is already “concerned” the country is heading for another real estate bubble may be hard to square in the boardroom of Carpetright.
Certainly there were few signs this week that the retailer was benefiting from any positive movement in home sales. Carpetright reported flat UK first-half like-for-likes against a backdrop of volatile trading conditions.
The floorings retailer has had little help from outside forces since the UK economy and consumer sentiment went into free fall five years ago, putting the brakes on big-ticket home improvements.
Carpetright has had to weather a tough half year, posting a 33% fall in underlying profits two months after chief executive Darren Shapland’s surprise October departure and founder Lord Harris’ subsequent return.
Carpetright has fought hard to stand still. But its programme of self-help - which has included extending the offer into beds and laminates, a broadening of its carpet range into higher price points and an extensive store refurbishment programme - has left it well prepared to leverage any strengthening in economic conditions.
The question for Carpetright and other big-ticket retailers is at what point will the reported recovery gather enough pace to translate into improving sales?
There is a growing view that recent economic data is pointing to an improving environment for home goods retailers. Fears about unemployment are subsiding, which should prompt those who have put off purchases to spend, while Carney’s recent remarks are born of evidence showing UK house prices have risen sharply as demand gathers pace off the back of government incentives.
For the home sector, these trends are yet to fuel more than a cautious optimism. But it is a notable strengthening of sentiment, underpinned by last week’s arrival of US homewares giant West Elm on these shores, and one that should drive confidence for the second half of next year.
As for the immediate term, concerns about inflation and stagnant wages will ensure shoppers maintain a tight grip on finances - a trend that will continue to benefit the discounters and squeeze the middle of the market. Luxury retailing looks set to build on a strong 2013, its target customers unaffected by financial hardship around them.
Like this year, 2014 will have its winners and losers. But with luck, retailers will be helped by the improving macro environment, not just their own dogged self-help efforts.
Carpetright records a fall in first-half sales and profits
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Comment: Growth shoots have yet to bear fruit for retailers