FLOORINGBUSINESSNEWS Pent-up demand starts to slow Pent-up demand will slow in Q4 as consumers focus on essential spending at the expense of bigger ticket items and home furnishings, according the latest figures from Next. The chain store who are a major furniture retailer said the 17% growth in Q3 would reduce to more like 10% in Q4. “This is due to price increases in essential goods such as fuel moderating demand for discretionary purchases such as furniture and the effects of pent-up demand declining,” said Next. It also said stock availability “has improved but remains challenging” and that it expects “delays in our international supply chain being compounded by labour shortages in the UK transport and warehousing networks.”
Insolvencies remain low despite Covid Company insolvencies in the furnishing and floorcovering sector have remained at historically low levels, despite the challenges of the pandemic. Company failures in Q2 and Q3 of this year were running at about 50 per quarter, similar to the 2020 statistics, and substantially less than the prepandemic level of 80+ per quarter in 2019. The statistics, compiled by The Furnishing Report, show flooring has thrived during Covid-19 despite lockdowns and supply-chain challenges. Commentators suggest that buoyant customer demand linked to generous Government support schemes has kept companies alive.
Beaulieu goes public on prices increases European leading flooring conglomerate Beaulieu International has gone public on announcing 8% year-end price increases across its brands. Wim Coppens, VP Flooring of Beaulieu International Group (B.I.G.) said: “During 2021, we have tried to limit the impact on our customers of the general cost inflation of raw materials, logistics and energy. “However, these costs have continued to increase significantly in the second half of this year, forcing us to implement additional price increases of typically 8%, depending on region and product line, during the last quarter of this year and into 2022.”
than earlier in the year. This adds a temporary challenge to our European businesses as the higher costs are reflected in gas, electricity and materials,” he said. Mohawk’s Q3 figures showed sales up 9.4% to $2.82 billion.
Balta grows after action on pricing and costs Major UK importer Balta Carpets grew sales by 4.9% in Q3 this year but warns that further action may be required on rising energy costs and ongoing raw materials issues. Announcing its Q3 results, the Belgium-based conglomerate saw strong growth in rugs and some recovery in the commercial sector but residential sales were down 3.6%, compared to a buoyant post-lockdown performance this time last year. Profits in the third quarter of this year, while slightly below Q3 2020 levels, were 21.4% higher than in Q3 2019. Cyrille Ragoucy, CEO and Chairman of the Board of Balta said, “In Q3, the strong increase in raw material and transportation costs first seen by the industry in Q2 2021 started to significantly impact Balta’s Cost of Goods Sold. While the start of the quarter still saw some benefit from the lower cost of raw materials purchased earlier in the year, this effect is coming to an end. As well as focussing on growing our business and continuously improving efficiency through our NEXT program, Balta has implemented price increases across all divisions to pass on the inflationary pressure.
Victoria builds on ceramics flooring Acquisitive flooring conglomerate Victoria plc continues to build its ceramics portfolio with a £7m acquisition in Turkey – and says it has more money to invest. The Kidderminster-based plc has added Graniser, a low-cost producer in Izmir, Turkey, to its ceramics operation. Victoria plc sees high demand in the sector and already owns nine major brands, mainly in Italy and Spain. Following completion of this acquisition, Victoria will have invested c. £201m in the current financial year. “We continue to have substantial amounts of capital to deploy and are in active discussions with additional high-quality opportunities to grow our business,” said Geoff Wilding, Executive Chairman of Victoria.
Budget boost on retail rates
Similar price rises are being applied across the flooring sector by manufacturers as price inflation in flooring has climbed to around 10%, but Beaulieu is one of the few companies to announce the extent of increases.
Chancellor Rishi Sunak announced a 50% reduction in business rates in a tax cut worth £1.7 billion as part of a package of measures aimed at retail to boost post-pandemic recovery.
Energy costs challenge to European flooring
Any eligible retailer will be able to claim a temporary discount on their bills of 50%, up to a maximum of £110,000 in the 2022-23 tax year.
Mohawk Industries - the world’s biggest flooring manufacturer - has cited energy costs as a key challenge across European markets alongside supply chain issues. The US-based conglomerate, best known in the UK for Quick-Step, Pergo, Unilin, Leoline and SmartStrand, has said Q3 demand is strong but added that anticipated improvements in the supply chain and the cost of labour and materials had not materialised and were limiting factors. Announcing Q3 trading results, CEO Jeffrey Lorberbaum commented: “For the near term, we do not foresee significant changes in these external pressures. Due to supply shortages, Government regulations and political issues, natural gas costs in Europe are presently about four times higher
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In conjunction with the existing Small Business Rates Relief, the chancellor said the move meant more than 90% of all retail, hospitality and leisure businesses would see a discount of at least 50%. The government is also freezing the business rates multiplier for another year (22/23), saving ratepayers £4.6 billion over the next five years and promised the introduction of a new revaluation cycle that will be delivered from 2023. But the announcement falls short of the major overhaul of the business rates system that the sector has long been calling for, not least to redress the imbalance between business taxes paid by online retailers compared to high street stores.
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THE STOCKLISTS December 2021