- Major DIY retailers plan further store closures
- Decline in home ownership blamed for falling sales
- Market expected to grow when the housing market improves
With B&Q’s recently installed new boss Veronique Laury announcing plans to close one in six of the chain’s 350 stores and Homebase owner Home Retail Group saying it intends to close one in four of its stores, has the bell finally tolled for the DIY sector? After years of downsizing, is this breed of bulky goods store limping to its death?
Announcements from the DIY chains that they are resizing their portfolios are nothing new. For the past decade the major operators – B&Q, Homebase and Focus – have carried out their own home improvements and cut off little bits of extra space.
New figures from Trevor Wood Associates, published this week, show that the share of DIY space in the retail warehousing sector slumped to its lowest level last year, dropping to 21.9%. In 2005, DIY stores made up 27.6% of the retail warehouse market.
For B&Q, this has meant its footprint has shrunk from 8.3m sq ft in 2005 to 8m sq ft last year. Plans to offload a further 60 stores over the next two years could see that fall by a further 1.4m sq ft. Homebase has slimmed from 5m sq ft to 4.8m sq ft over the same period.
While 300,000 sq ft and 200,000 sq ft respectively may not sound like a lot over an almost 10-year period, there were bouts of expansion during that time, with both firms picking up space from the casualties of the downturn, including Focus. Focus and the 3m sq ft of space it occupied finally succumbed to falling sales and rising debts in 2011.
But that was at a time when the economy was struggling. So why are the DIY chains still suffering?
The answer it seems lies with the bigger problem the UK faces – the housing market.
An increasing number of renters rather than owners and more young professionals still living at home – some 25% of 20- to 34-year-olds live with their parents – means that fewer Brits are “doing it themselves”. Renters are often not allowed to do it, and those who do own their homes are increasingly likely to “get someone in”. GSI is the new DIY.
Maureen Hilton, a retail analyst at Columino and a member of the KPMG/Ipsos Retail Think Tank, says: “The market has been eroded by other retailers where people can go and pick up smaller essentials. There has been a shift towards getting professionals in and there are not as many people moving house, which means they lose out on selling kitchens and bathrooms.”
She adds: “The DIY market will improve when the housing market improves.”
Dominic Rodborne, head of out-of-town retail at Savills, agrees. “DIY has always been linked with housing transaction volumes,” he says. “While they are up, people spend more money.”
And while housing is the hot topic for most of the political parties as they move towards a general election, the ability to get onto the housing ladder is likely to remain a tough battle for many years to come. That means DIY chains are likely to suffer further and more space will come to market.
Laury admits B&Q has “a lot to do” but is adamant there is a future for DIY, it just needs to adapt to changing consumer needs.
In the first set of annual results since she took the reigns last month, she said: “Home improvement is a great market with huge potential and Kingfisher [B&Q’s parent company] has a strong position within it, with further scope to grow in a sustainable way. However, it is clear to me that we need to organise ourselves very differently to unlock our potential.”
That potential may be locked up in B&Q’s £800m of UK and Irish assets.
“A 30,000 sq ft B&Q store from the 1980s is likely to be surrounded by residential and could be converted to residential itself,” suggests Rodborne. “With population growth, the irony is that we will need more homes and in a few years the DIY retailers will need to expand again to keep up with demand.”
It would appear that the future of DIY hinges on the ability to breathe life back into the UK housing market.
