THE DIY MARKET SUPPLEMENT 2019 GROSS MARGIN: TILES ARE TOP
1. Topps Tiles 2. Tile Giant 3. Al Murad 4. Screwfi x 5. Wickes
6. Homebase
7. Gardiner Haskins 8. Taskers
9. Toolstation 10. Wilkinson 11. The Range 12. B&Q
13. Leekes
14. Axminster 15. B&M
16. Charlies Stores 17. Home Bargains 18. Trago Mills 19. Argos
20. Robert Dyas
5yr average 61.2%
53.2% 46.9% 45.0% 45.0% 42.7% 42.3% 40.8% 40.5% 39.8% 39.7% 39.4% 37.1% 36.4% 34.2% 34.0% 30.7% 27.7% 24.6% 14.6%
Source: DIY Week analysis of fi led company accounts I
f gross margin is what turns you on, get into tiles. That’s the clear message here, with the top three places in the table taken by tile
specialists. We assume that Topps’ clear advantage over Tile Giant and Al Murad is a refl ection of its sheer size, and hence its enhanced buying power. Even so, Al Murad, with the lowest gross margin of the tile specialists, is still comfortably ahead of the other retailers in the table. Joint fourth place goes to Screwfi x and
Wickes, both with a fi ve-year average gross margin of exactly 45%. In view of the level of price promotion that goes on at both chains, that 45% is testament to their skill in price management: sacrifi ce the margin on the headline price-sensitive lines, and then claw it all back again on the low-profi le non-price sensitive products.
Homebase has traditionally run on a high gross margin, and its position
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in the table would be higher were it not for the slip to 41.2% in 2016/17, followed by a further decline to 36.1% in the latest fi nancial period. We don’t know the cause of this decline; was it Bunnings discounting old stock to make room for its new house brands, or increasingly desperate price promotion as it became clear that the conversion to the Bunnings format wasn’t delivering the expected sales fi gures? Whatever the cause, it brought Homebase’s fi ve-year average down quite signifi cantly: fi ve years ago the chain’s gross margin was a full fi ve points higher than B&Q’s, and in the latest accounts it’s more than two points lower. It’s interesting that Gardiner Haskins Taskers, two of the smallest
and
businesses covered by this survey, seem to have no problem in maintaining gross margin – in fact the 42.8% in Gardiner’s latest accounts represents a fi ve-year high.
Overall, this table indicates that pressure on margins has increased,
but not to a great extent. 12 of the 20 retailers in the table recorded a year- on-year decline in gross margin, against seven recording a rise. And among those with declining gross margin, most were relatively small movements. An exception is Axminster, which has seen quite a signifi cant drop in gross margin over the past fi ve years. We suspect this may be a refl ection of its exposure to the professional power tool market, which is subject to vicious online price competition. The fi gure for Robert Dyas clearly
isn’t the diff erence between buying price and selling price – we assume that the company’s accountants have loaded the cost of sales line with more than the cost of goods for resale. Perfectly legal, and an eff ective way of concealing your true trading position from your competitors. The same accounting practice applies at Argos, although in this case the notes to the accounts make it possible to calculate the true gross margin, which we believe to be about 27%.
DIY WEEK THE DIY MARKET SUPPLEMENT 9
Latest year 61.1%
52.7% 51.8% 43.7% 43.7% 36.1% 42.8% 38.9% 41.1% 39.8% 37.7% 38.5% 37.1% 35.7% 33.8% 34.7% 31.6% 27.0% 23.2% 13.6%
- 1 year 61.1%
55.2% 49.2% 44.0% 47.0% 41.2% 42.4% 43.3% 41.3% 38.9% 39.5% 38.7% 36.8% 31.1% 34.5% 34.5% 30.9% 28.7% 24.0% 13.9%
-2 years 61.9%
50.1% 45.5% 45.5% 47.0% 44.1% 42.5% 42.6% 40.7% 40.2% 40.3% 38.8% 38.5% 38.0% 34.3% 34.6% 31.1% 27.9% 24.9% 13.7%
Benchmark - 3 years -4 years
61.2% 60.9% 55.6% 52.3% 48.1% 40.0% 45.7% 46.2% 43.7% 43.7% 45.6% 46.7% 41.6%
41.9%
39.9% 39.2% 40.1% 39.4% 40.3% 40.0% 40.3% 40.8% 40.1% 40.8% 36.7% 36.5% 38.5% 38.6% 34.4% 34.0% 33.7% 30.3%
27.6% 27.2% 25.6% 25.0% 16.4% 15.6%
32.4% 29.6%
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