Essential reading for retailers and suppliers in the home improvement market

Heavy discounting erodes margins further in February

Published: 7 March 2012
Non-food sales remained static last month with small gains in DIY and garden, while discounts to try and stimulate growth continue to eat into retailers' margins.
Total retail sales were down just 0.3% compared with the same month last year, according to the BRC's latest sales figures. Meanwhile, non-food saw a similar like-for-like decline for the three months from December to February, despite ongoing promotions and discounts.

It was another quiet month for gardening and DIY, as cautious consumers were loathed to part with their money unless encouraged by promotional activity. The sector did see some gains, with the cold weather boosting sales in heating although this also hit gardening and outdoor DIY. The improve, not move trend favoured smaller decorating projects, while the milder weather at the end of February, helped sales of gardencare, bedding plants and lawnmowers.

Homewares struggled in February, with home accessories showing its largest year-on-year fall since May 2008. Sales of house textiles weakened but still remained just up on a year ago. Some noted good sales of heaters and bedding during the cold weather but, for most retailers, there was a return to cautious spending and a focus on essentials after the bustling January clearance sales. Spring cleaning promotions did help boost sales in floorcare, hardware and cleaning products, however.

BRC director general Stephen Robertson said: "Total sales growth is still below inflation, so overall, customers are actually buying less than a year ago, while discounts are eating into margins... Non-food sales deteriorated with goods affected by the slow housing market among those particularly struggling."

Furniture and floorcovering sales fell back below their year-earlier level, after good growth in December, although underlying trade remained weak and promotion driven, according to the BRC. Like many sectors, consumer caution hit big-ticket purchases, impacting on sales of fitted kitchens and bathrooms.

In electricals, sales of white goods held up in February, although these were largely driven by replacement purchases, especially for larger items.

Non-food non-store sales, including online and mail order, were up 9.9% in February. However this figure represents a further slowdown in growth in the sector, with sales dropping from a peak of +18.5% in December, to +11.3% in January. The BRC report explained that, while this sector's growth is still outpacing store sales, the expansion is from a low base, as, as non-store sales currently account for just 9% of total retail sales per year.

KPMG head of retail Helen Dickinson commented on the report: "Consumers remain reluctant to spend unless encouraged by promotional activity. Thus, while the market is still growing slightly in headline sales terms, profitability continues to be eroded through loss of margins.

"Many retailers feel they're fighting very hard just to stand still at best and don't see any light at the end of the tunnel. However, there are retailers out there who deliver what the customer wants and needs - in terms of product, brand and price - which proves that if the proposition is spot on, it is still possible to outperform the market and competition."

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