DIY retailers hoping for 'halo effect' as housing market improves

DIY retailers are set to receive a boost from the housing market ­recovery as cost-conscious consumers finally splash out on home improvements as the economy ­improves, according to corporate health specialist Company Watch.

Firms such as B&Q, Homebase and Wickes suffered when the housing market nosedived during the recession. But since it has started to recover, UK DIY retailers could soon benefit from the halo effect as they have done in the US.

Last week the British Bankers’ Association said that mortgage approvals to home­buyers are 31 per cent higher ­compared with the same period last year and remortgaging approvals are 40 per cent higher.

Nick Hood, of corporate health specialists Company Watch, said: “As clear signs emerge of a surge in the housing market, there may be light at the end of the home ­improvement tunnel.

“The major US DIY chain, Home Depot, has just reported stellar figures, with a 10 per cent rise in like-for-like sales during the last three months off the back of a similar upturn in the US residential market.

“We must all hope that what we are seeing is a sustainable housing turnaround, not a bubble.”

Sales at B&Q and Homebase have gone into reverse since 2008, falling by 1 per cent and 5 per cent respectively over the past five years. Sales at Wickes and Screwfix have stagnated, with the ­companies recording just 5 per cent growth over the same period.

Hood added: “The leading DIY retailers have had a miserable time since the recession. They have struggled to earn a meaningful return on the £5 billion of capital they have tied up between them, despite improving profit margins.

“Their difficulties are summed up by the fact that the two biggest, B&Q and Homebase, both suffered a 5 per cent drop in like-for-like sales in 2012 at stores that had been open for at least a year.”

According to Company Watch statistics, B&Q, Homebase, Wickes and Screwfix have made a pre-tax profit of only £975 million on turn­over of more than £32 billion since the recession started.

Like-for-like sales at Homebase dropped by 4.9 per cent last year.

Earlier this year B&Q owner Kingfisher saw first-quarter profits plunge by nearly 30 per cent on the cold winter. However, improved weather saw sales recover in the second quarter with consumers rushing out to buy outdoor furniture, barbecues, hosepipes and plants for the garden.

Source : Ravender Sembhy – The Express
www.express.co.uk/finance/city/426063/Housing-boost-for-DIY-chains