Home improvement bonus
Published: 01 June, 2010
LONDON: DIY and home improvement retailers will benefit from recent improvement in housing activity said analysts.
Deutsche Bank said: "House moves are running 30% up on the last year and house owners continued to benefit from the lowest ever mortgage rates, so we expect investors to recognise that increasingly there are less reasons to worry about UK DIY than most other consumer markets."
The bank holiday weekend saw the start of the World Cup countdown, which will boost retail sales. Angus MacIver, marketing director at Morrisons supermarket said if England do well and extend their time in the tournament "it adds a couple of percentage points of growth to our sales."
The fillip could also boost B&Q owner Kingfisher, which is expected this week to report a sales decline over the past three months. Poor weather has caused concern about the strength of business over the start of the year, with Liberum Capital terming the conditions "remarkably unhelpful" for B&Q.
B&Q's performance may exceed market expectations the broker said, noting that mortgage approvals were up by an annual rate of 25% over the first quarter and planning applications, which in the past have "shown a good correlation with B&Q's like-for-like sales should now be heading into moderately positive" territory in year on year terms.
Liberum's pencilled in a 2% fall in B&Q's first quarter like for like sales. UBS analysts have the same figure and point out that, if achieved, the result would be in line with Wickes' performance.
Kate Calvert at Shore Capital and also brokers at Investec expect B&Q to post a like for like sales decline of 3%, reflecting the poor weather and the tough comparative from last year when, boosted by favourable weather conditions, B&Q booked a 2.9% rise over the first quarter.
However, analysts expect gross profit margins to continue benefiting from Kingfisher's efficiency push, which includes buying more products from cheaper manufacturing centres such as Asia.