THE WHOLESALE MARKET SUPPLEMENT 2019


Benchmark


HARDWARE WHOLESALING: GENERALLY IN GOOD HEALTH


Benchmark


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© 2019 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.


T


he 12 companies covered by this year’s DIY Week Wholesale Benchmark are a mix of delivered wholesalers and cash-and-carry operators. They range in size from Toolbank’s parent company Dormole, with sales of nearly £224m, down to the Scottish dealer- owned Home Hardware Scotland with sales of just £8.4m. Some off er national coverage, and others are regional. Some


are general hardware wholesalers, and some are specialists: Aldridge in security, for instance, and Handy Distribution in garden machinery. Between them they represent the main supply chain for the independent hardware and DIY retail sector, and their sales therefore give a good idea of trends in that sector. And the trend is encouraging: fi ve years ago these 12 wholesalers had combined sales of £521m, and in the latest year their combined sales were 22% higher at nearly £636m. Almost all the companies listed here have grown their sales over the past fi ve years, in some cases quite substantially: EFG and Newton Hale, for instance, have almost doubled their sales over the fi ve years. Bromborough, North West Tools and Toolbank all achieved steady and signifi cant growth as well. Harrison & Clough and Handy Distribution are the only companies whose sales in the latest period were lower than they were fi ve years previously – in other words, 10 of the 12 wholesalers covered are growing their sales. There is constant pressure on margins, however. Five years ago these 12 companies


recorded an average gross margin of 23.0%; a year later it was 22.9%, then 22.6%, then 22.4%, then 21.4%. Newton Hale, Decco, Home Hardware Scotland, EFG and North West Tools have all seen their gross margins fall – in some cases quite signifi cantly. However, with the exception of Harrison & Clough, all the companies covered are consistently profi table at operating level. Most wholesalers are remarkably consistent in their stock management, too. Over


fi ve years, Decco’s stockturn has varied only slightly, from 6.0 times a year to 6.7 times. At Home Hardware SouthWest, the variation in the same period is between 4.7 times and 5.4; at Stax, from 4.5 to 5.0. Such consistency is understandable, because from the retailer’s viewpoint, stock availability is everything – why would a retailer want to order from a wholesaler who may or may not have the stock? Newton Hale’s stockturn, by contrast – up at 9.0 times a year from just 6.6 times two years earlier – is interesting, to say the least. Likewise EFG, fl uctuating from 6.7 times to 5.1 times and then to 8.1 times in consecutive years. EFG Housewares consistently records the lowest staff costs of all the wholesalers


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covered by this survey, with salaries averaging just 6.3% of turnover over a fi ve-year period. Across all 12 companies, the fi ve-year average is that wage costs represent 11.9% of turnover, with remarkably little variance from year to year. So the message seems to be: if you’re running a wholesale business and your staff costs are less than 12% of turnover, you’re ahead of the game; if they are more than 12%, you’re probably not. Newton Hale’s massive return on capital is largely a refl ection of its very modest capitalisation. Apart from that, the middle ground shows what a solid business hardware wholesaling can be: eight of the 12 companies listed regularly deliver very respectable returns, and mostly in double digits. Excluding Harrison & Clough, which appears to have some serious issues, the annual collective average return on capital fi gures (reading back from the latest year) are 14.6%, 16.7%, 20.2%, 20.2% and 12.1%. And the fi ve-year average for the 11 companies is 16.8%. That’s very healthy indeed. Finally, the DIY Week Index. It’s intended to give an overall view of a company’s general effi ciency and competitiveness, and is calculated by multiplying what we have always considered to be the three fundamental trading ratios: sales growth, stockturn, and operating margin. Disregarding EFG Housewares, where this year’s Index score is infl ated by the fact that the company changed its accounting period in 2016, Newton Hale tops this year’s Index chart (although there is an indication that this growth, at least in the latest year, has been achieved at the expense of a signifi cant drop in margin). And it is followed by a number of companies which record consistently healthy Index scores: Toolbank, Bromborough, North West Tools, and Aldridge.


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