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THE GARDEN MARKET SUPPLEMENT 2018


Benchmark


GARDEN CENTRE RETAILING:


enchmark, the new name for DIY Week’s overview of the garden centre market, is intended to ‘do what it says on the tin’, and provide garden centre operators with a benchmark against which


Benchmark


Publication Manager: Sallie Payne 01622 699 151


spayne@datateam.co.uk Research and text: Colin Petty


Publishing director: Paul Ryder 01622 699 105


pryder@datateam.co.uk


Art editor: Paul Forster 01622 607 962


pforster@datateam.co.uk


© 2018 Datateam Business Media Ltd. DIY Week incorporates Decor Retailing, DIY Retail Leaders, DIY Superstore, Do-It-Yourself Retailing, Domestic Electrical Appliances, Excellence In Garden Retailing, Excellence In Woodcare Retailing, Excellence In Timber Retailing, Excellence In Tile Retailing, Garden Retail Leaders, Garden Retailing, Hardware Merchandiser, Hardware Trade Journal, Homecentre, Home Storage Retailing, The Ironmonger, Ironmongery & Hardware, Lighting, Martineau & Smith’s Monthly Circular, Mercantile Guardian, Superstore Management, Tools Retailing, and Wholesale Leaders. No part of this publication may be reproduced by any means without prior written permission from the publishers. Every effort is made to ensure the accuracy of material published in DIY Week. However, Datateam Business Media Ltd will not be liable for any inaccuracies. The views expressed by contributors are not necessarily those of the editor or publishers. DIY Week is registered at Stationers’ Hall. ISSN 0954-8823. DIY Week is printed on environmentally friendly paper; both text paper and cover stock are elementary chlorine free and sourced from paper suppliers with a well planned environmental policy. This issue of DIY Week includes some editorial photographs provided and paid for by suppliers. Printed by Buxton Press.


they can measure their own performance. To create Benchmark, we have analysed the past fi ve years’ accounts for 26 of the UK’s top garden centre operators. We have studied their sales, gross profi ts, operating profi ts, net profi ts, and staff costs. We have calculated their sales growth, stockturn, margins, staff productivity and return on capital. And we have further calculated the averages achieved across all these companies and all these ratios, for each of the fi ve years, creating a data resource which is exclusive to DIY Week readers. Much of this data is simply not available anywhere else.


We are proud to sponsor the Rainy Day Trust


Datateam Business Media Ltd, 15a London Road, Maidstone, Kent, ME16 8LY


Tel: 01622 687031 Fax: 01622 757646 www.datateam.co.uk


Published by


One of the things that makes the garden centre market special is that independent operators still account for by far the largest part of the market. In the latest accounting period Wyevale, the market leader, accounted for only 31% of total sales made by the 26 Benchmark companies, and second-placed Dobbies took 14% – so the two biggest operators together made less than half the total sales of the Benchmark 26. All the rest went to independents. And if we factor in the sales made by the hundreds of small garden centre businesses which are not covered by Benchmark, Wyevale’s and Dobbies’ share of the total market will be much smaller. And one of the things that makes the garden centre business so attractive is that at a time when retailing generally is under pressure, garden centre retailing remains very healthy, achieving consistent, substantial growth. Our 26 companies have grown their collective sales by nearly £200m, or 22%, in the space of fi ve years. For the record, in those same fi ve years, the top three national DIY chains (B&Q, Homebase and Wickes) managed combined growth of just 0.5%. That said, our analysis shows clearly that the average sales growth rate across the industry has been declining steadily: after bouncing back from an average decline of 1.6% fi ve years ago to strong average growth of 7.4% a year later, the annual average gain has slipped since then, down to 3.9% in the latest year. So it’s not all good news – but then again, there are retail sectors where 3.9% growth would be welcome. Garden centre margins are holding up well, too. The majority of the Benchmark operators recorded a


A STRONG MARKET B


higher gross margin in their latest accounts than they did four years earlier. And by the standards of retailing generally, garden centres do very nicely indeed. We suspect that the key to this strong and consistent gross margin is catering: the coff ee shop makes money all the year round, every day of the week, and regardless of the weather; and the mark-up available on a cup of coff ee or a slice of cake is much greater than on most garden products. The trend continues into the all-important operating


margin: over the fi ve years, the 26 Benchmark companies have collectively recorded average operating margins of 4.8%, 5.5%, 5.0%, 6.6%, and 5.2%, giving an average for the whole sample across the fi ve years of 5.6%. And again, comparison with the DIY chains is illuminating:


B&Q’s average


operating margin over the same period was 1.2%, and Homebase managed an average of just 0.8% over the four years before Wesfarmers blundered in and brought the business to its knees. In the high street, both Robert Dyas and Wilkinson recorded fi ve-year average operating margins of just 1.5%. The only home improvement retailer to match the garden centre sector was Wickes, with a fi ve-year average operating margin of 5.7% Garden centres manage their staff costs well: excluding a few outliers, the majority of operators show staff costs against turnover tightly clustered in the 22%-26% bracket. So the overall picture is one of strong growth,


strong margins and strong cost management. And that translates into strong return on capital. Again excluding a handful of outliers, the garden centre companies covered by the Benchmark survey recorded an average return on capital over the fi ve years of 9.4%. Look closer at that fi ve-year average, and it becomes clear that it is the result of a steadily rising trend: from 6.7% at the start of the fi ve years, then 9.1%, then 9.3%, then 10.5%, and fi nally 11.6% in the latest fi nancial period. Moreover, those fi gures are not the result of boom followed by bust – they are the result of consistent good performance, year after year. All of this gives the lie to the conventional wisdom that the UK’s unpredictable weather makes garden centre retailing a high-risk business. Far from it: DIY Week’s Benchmark analysis shows clearly that garden centre retailing is demonstrably a sound market for investment. Furthermore, it shows that it’s a market where independent retailers continue to match and exceed the performance of the national chains.


Colin Petty Researcher


www.diyweek.net DIY WEEK GARDEN MARKET SUPPLEMENT 3


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