- Third quarter sales down 16%
- Marshalls stock falls 28%
- News will worry shareholders in other DIY chains
Patio and paving firm Marshalls (MSLH) reported a sharp decline in sales to the home renovation and DIY market in the three months to September as consumers slammed on the brakes ahead of the hike in household fuel bills this month.
It is a warning that should make investors in several other DIY suppliers, such as B&Q-owner Kingfisher (KGF), Wickes (WIX) and Travis Perkins (TPK), worried.
Landscape product revenues slumped 16% in the third quarter compared with 1% at the half year stage due to ‘a marked softening of demand for private housing RMI (repair, maintenance and improvement) in both the UK and international markets’.
Marshalls shares tumbled as much as 28% in early trading before steadying down 20% at 241p after it cut its full year earnings outlook.
HOME IMPROVEMENT BOOM OVER
Sales of all kinds of home improvement products went through the roof during the Covid pandemic as consumers splashed out on ‘doing up the house’, prompting product shortages and huge price rises.
The splurge in spending extended to kitchens, bathrooms and interior furnishings as well as big-screen TVs and Netflix subscriptions.
However, households who might have had a couple of thousand pounds set aside for renovations are now rethinking their plans in the face of higher food and energy prices and rising mortgage rates.
There have been a few warning signs that the improvement part of the RMI market was stalling, but many retailers are still comparing their 2022 sales to 2019 to show they are growing and avoiding direct comparisons with 2020 and 2021.
STOCKS TO WATCH THIS QUARTER
Back in August, builders’ merchant Travis Perkins warned that its Toolstation power tool and hardware business had seen a big drop in sales as the DIY market ground to a halt, so investors need to keep an eye out for its next update on 20 October.
In its September trading statement, home improvement retailer Wickes said it had seen ‘a recent softening of the DIY market’ over the summer but backed its forecast for the full year.
Given its expansion into the DIFM (do-it-for-me) market in kitchens and bathrooms - just the kind of big-ticket item households are cutting back on - we would watch the firm’s next update carefully.
The same applies to DIY retailer Kingfisher, which saw sales drop in the three months to mid-September but said sales of outdoor, kitchen and bathroom ranges at its B&Q stores were still ‘resilient’.
In its interim trading update for the six months to June, kitchen specialist Howden Joinery (HWDN) talked up the market for UK kitchen and joinery products, but we suspect it could be a different story when its published its next trading update at the start of November.
