Thanks to the acquisition of Toolstation boosting total sales growth these numbers aren’t actually too bad, but they once again demonstrate how difficult conditions are for DIY retailers right now. Despite having shrunk by £1.2bn in the past five years, the sector continues to contract and even the exit of rival Focus has seemingly not provided Wickes with much breathing space.

When the housing market picks up and enthusiasm for DIY returns Wickes, along with B&Q and Homebase, is well placed to benefit. However, their problem is that there is currently little sign of that happening in the next twelve to eighteen months.

The acquisitive strategy, expanding into new areas such as kitchens and bathrooms, and re-affirming their authority as a destination for tradesman are all good moves for Wickes. But until their core markets stabilise their performance is likely to continue to zig-zag.

Source: Conlumino 15th May 2012

Given the general conditions in the greetings card market radical restructuring was always necessary at Clintons as the chain was just too large and unwieldy to survive. This could have come about by offloading some stores and selling off the Birthdays chain; however, while this strategy was identified in the company’s review, execution was painfully slow and a sale was proving difficult.

American Greetings, the owner of Clinton’s debt, now looks likely to push the chain into administration. As painful as this process will be, a forced restricting will ultimately be beneficial and a leaner, more financially viable chain will emerge as a result. In our view, American Greetings own interest in parts of the business cannot be precluded.

While we believe that there is a place for physical greetings cards retailers, the necessity of them has waned over recent years, for three main reasons. First, there is a longer term softening of demand for greetings cards as consumers find other ways of communicating. Second, the sector is now much more competitive as many players, including the grocers and high street stores, have their own credible card and wrap offerings. Third, a rapidly growing digital card market is actively taking share away from the physical stores.

In our view the key to future success is relevance: in whatever shape it emerges, Clinton needs to give consumers reasons to visit, part of which will involve making shops more inspirational and putting in place a coherent digital strategy.

Source: Conlumino 09/05/2012

. Households are now spending £1.2bn less on DIY than they did in 2008

. Spending forecast to decline further – by 3.7% this year

. Despite finances being tighter, last year 52% of consumers called in a professional to undertake DIY tasks

. 51% of consumers say they would use professional tradesmen more if they had the money

A declining market

New research from Conlumino shows that the DIY market is facing another bleak year with total spending on the sector forecast to decline by 3.7% in 2012. This comes on top of a continuous period of decline since the onset of the original recession in 2008 which has seen the market shrink by a total of £1.2bn. Conlumino estimate the market to be worth £14.9bn today.

“Back in the halcyon days when ownership of a property allowed you to simply kick back and watch its value skyrocket, consumers had few qualms about spending significant amounts to make improvements to their homes. It simply doesn’t work like that anymore.” says Neil Saunders, Managing Director of Conlumino.

The DIY market has been one of the most pressured areas of retail with a number of notable casualties. “There are now only 3 true DIY players left whereas there used to be loads in the market, it simply demonstrates the contraction of the sector over recent years” notes Saunders.

Done for you

As well as economics, Conlumino also believe that a shift in consumer preferences and psychology has driven people away from DIY with only a third of consumers saying that they enjoy undertaking DIY tasks.

“DIY shows used to dominate the airwaves and everyone wanted to get in on the trend of home improvement. However, this approach to DIY has since gone the way of Carol Smillie and ‘Handy Andy’ themselves, slipping out of the national consciousness. People are much less enthusiastic about the sector than they once were” comments Saunders.

Despite money being tight, more consumers are now turning to professional tradesmen to get tasks done. Conlumino’s research shows that just over 52% of households called in a professional to undertake DIY tasks in the last year; five years ago that figure was a shade over 40%. And 51% of consumers say they would actually use tradesmen a lot more if they could afford to do so.

This switch to done for you solutions has taken sales away from the retail market but has helped the trade side of DIY. “Trade is a big opportunity for DIY players” says Saunders, “Wickes has always been strong here but B&Q has also made great strides over recent years with trade counters and its Screwfix proposition.”

Adapt to survive

As well as moving in to trade, the big 3 DIY players have also successfully grown share in non-core DIY areas such as fitted kitchens and bathrooms, with both B&Q and Wickes taking advantage of the failure of retailers like Homeform and MFI.

“There is a recognition that too great a reliance on core DIY simply isn’t sustainable,” says Saunders “retailers have had to adapt to survive and that adaptation has involved moving into new product areas.”

With 43% of consumers only visiting a DIY store once a year or less, Conlumino believes that DIY players must also focus more on making store environments inspirational.

“With fewer people undertaking DIY and a greater reliance on tradesmen, potential footfall is reduced. That means the role of the DIY store has to change from a place where you go to stock up on products to one that helps create ideas and inspiration around the subject of home decor. Many players have improved on these things in recent years, but there is much further to go” says Saunders.

Source: Conlumino Press Release 8th May 2012

Whether this modest improvement in underlying trading is sustainable remains to be seen; especially as the better LFL numbers can be largely attributed to much softer comparatives last year. Easter 2011 was uncharacteristically warm and Thorntons’own store sales were down by almost 14% as a result. Against such weak numbers this current quarter’s performance does not seem quite so rosy.

Indeed, in our view Thorntons’ remains a company in decline. Its brand is simply less relevant than it once was, its ability to extract a premium for its product has been much reduced and it faces more and much tougher competition on both the retail and the wholesale front.

None of this means to say that there isn’t a future for Thorntons; there probably is. However, that future will be a much smaller company with a lower proportion of sales driven through the retail channel. The next couple of years will be about managing this decline and putting the company back on a sound footing.

Thorntons Q3 trading update 16 weeks to 28 April 2012

Own stores – 6.1% total, – 1.6% LFL
All retail- 4.1% total
Total company  – 2.7%

 
Source: Conlumino 3 May 2012

This is all occurring against the backdrop of a market which can be characterised by its intensifying competiveness, with the underperforming market leader Tesco investing heavily in an attempt to regain the impetus.

13 weeks to 29 April 2012

Total +1.5%

LFL sales -1.0%

Ex fuel and ex VAT

Nonetheless, the long term course which Dalton Philips has put Morrisons on seems sensible. The grocer continues to utilise the advantages of its vertically-integrated supply chain to provide products which are well-regarded in relation to quality and freshness. Moreover it continues to roll-out its fresh concept and evolve its private label offering, furthering strengthening its quality credentials.

The grocer’s focus on providing fresh and good-quality products, at comparatively low prices, is helping it to differentiate from its competitors and has, to an extent, negated the need for the same level of deep promotional activity as its rivals. Indeed, Morrisons’ fresh emphasis positions it in good stead for the long term, with fresh set to replace space as the key battleground for food and grocery market share.

In the short term, as with its peers in the sector, the grocer will inevitably benefit from the occurrence this year of the Jubilee, Euro 2012 and the Olympics. However, with the recent acquisition of Kiddicare and its plans around non-food and online, the longer term challenge for Morrisons will be to maintain its core values as it continues to expand its scope. For example, in an attempt to partially offset its investment in evolving the proposition, the grocer continues to focus on controlling costs. However, it must be careful to avoid this cost focus impacting fundamental aspects of its business such as merchandising, availability and instore staffing levels.

Source: Conlumino 3rd May 2012