Our predictions for the road ahead in 2018

We’ve all read the articles that provide retail predictions for the coming year, this retailer’s going to grow, this one might find things a bit tough, online retail will continue to take share etc. They always make interesting reading, but rarely do commentators put their neck on the block and say what they really think is going to happen in 2018.

We talk to retailers, suppliers, investors and researchers on a daily basis and using this input alongside our detailed knowledge of the UK's Home Improvement and Gardening industries, we’ve been able to create our Insight DIY predictions for 2018; a retailer by retailer guide to the initiatives, developments and challenges that we’re likely to live through in the year ahead.

B&Q

With annual results due on 21st March, our prediction is for B&Q to end their current year in a relatively good place, with a slight negative like for like, but an improved position on the -1.9% like for like experienced in Q3. If the business remains on track to deliver the £500m of promised incremental profit by year 5 of Kingfisher One, then everything looks hunky dory.

The business will power ahead with its plan to implement the unified ranges dictated by Kingfisher, with the remainder of Gardening and Building Materials on their way in early 2018, following the Batteries, Lighting and Decorative Accessories we saw last year. Like any decent retailer, B&Q has spent years becoming an expert in category management, ensuring that every category and product performs to the max' and the retail space sweats. Poor performing products would quickly be exited and ranges, prices and promotional activity would be tweaked to ensure the maximum return.

As the unification roll out gathers pace, B&Q (Castorama & Brico) quickly realise that in some categories, elements of the unified ranges simply aren’t performing and what we refer to as ‘dark spots’ can be identified within each category – products, ranges and spec’s that countries took as part of the unified offering, that have been rejected by their customers.

The ultimate sin for any retailer is to have valuable selling space cluttered up with poor performing products and ranges. Unified or not, if a product doesn’t sell, it doesn’t sell and sometimes no manner of price changes or promotion will make any difference.

Before the end of 2018, to ensure that overall B&Q performance is not significantly derailed, we predict a Kingfisher task force will be put in place to identify the non-performing ranges and work on a plan to resolve the issues. Suppliers are asked to pull together proposals to replace the poor performing ranges and if you’re a supplier, you already know which unified products and ranges aren’t going to sell in your categories in 2018 and we suggest you start work now on a proposal to fill the dead space.

Read – An ‘intoxicating mix’

Bunnings Warehouse

With 15 pilot stores now up and running and another 8 conversions in the pipeline, confidence is up. The second smaller format pilot conversion Herne Bay opens in February, with pretty much the same layout and format as the Bunnings store in Bicester.

Read – It’s not a Bunnings and it’s not a Homebase

On 21st February, owner Wesfarmers announce their half year results including an update on Bunnings UK and Ireland performance. Following a poor Christmas trading period (partly due to the weather) and disappointing January, including weaker than forecast kitchen and bathroom sales, they announce a further deterioration in the combined Homebase/Bunnings business, with like for like sales more than 15% down. The senior team put on a brave face and explain that with the wind behind the pilot stores and weaker year on year comparatives to come, the situation will improve.

However, investors raise serious concerns as to whether the company will ever make a profit from the UK & Irish business, nervousness amongst suppliers increases and pressure mounts on new Wesfarmers CEO Rob Scott to review the investment.

Nevertheless, Homebase store conversions continue to plan with between 30 and 35 pilots open by the end of May. We see prices in the remaining Homebase stores continuing to increase, now well above B&Q levels, as the team investigate every avenue to stem the losses.

On 7th June 2018 at the annual Wesfarmers Strategy Briefing, there’s little mention of Bunnings UK & Ireland other than the fact that Rob Scott has instigated a strategic review of the business and he announces that the plan to convert further Homebase stores has been put on hold until the outcome of the review.

At the Wesfarmers annual results briefing in August 2018 Scott confirms that regrettably the decision has been made to withdraw from the UK and Ireland and an exit plan for the business is explained. Venture capiltalists begin circling and B&M Bargains and The Range head the queue to pick up stores.

To continue reading the article and hear Steve's predictions for the other retailers, you can access the remainder of the article here on LinkedIn.

If you've found this article of interest, you can find out more about the author Steve Collinge here and you can contact him at Steve@irg.co.uk.

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