UK garden centres face significant challenges as key retailers, Dobbies and Homebase, undergo restructuring amid financial stress.
- Dobbies plans to close 17 stores to achieve “sustainable profitability” following hefty losses and falling sales.
- Homebase seeks new investment post-store sales, confronting a tough financial landscape with significant losses.
- The sector feels the weight of economic pressures, with consumer caution impacting trading and demand.
- A potential uplift in the housing market may provide a much-needed boost for UK garden centres.
Dobbies is set to close 17 of its stores, including all six of its ‘Little Dobbies’ urban formats, in an effort to address uneconomical rent costs and secure long-term sustainability. The company reports a pre-tax loss of £130.8m for the year ending March 2023, a staggering drop from the previous year’s £21.3m loss. Sales also declined by 8% to £278.7m, largely attributed to adverse weather conditions and macroeconomic challenges. Jonathan De Mello, a property expert, contends that these issues are partly self-inflicted, citing Dobbies’ costly acquisition strategy and new store formats that didn’t deliver expected returns. Nicholas Marshall, a former Dobbies CEO, also believes misalignment with core customers contributed to its current predicament. This echoes his observations on missteps in catering to customer demographics, such as misguided in-store restaurant offerings.
Homebase recently sought a £130m cash injection by selling part of its store estate, as it navigates turbulent financial waters. The company’s CEO, Damian McGloughlin, is actively seeking new investors, stating, “We will have the opportunity to explore the market and potentially benefit from fresh investment.” With a looming £85.2m loss reported for the previous fiscal year, down from a £55.6m profit, Homebase also faced a decline in sales by 11% to £701.2m. The company attributes these declining figures to the cost-of-living crisis, increased operational costs, and dampened consumer confidence. Initially buoyed by a private equity acquisition in 2018, Homebase has recently struggled to maintain financial stability due to market pressures and has had to strategically downsize.
The wider gardening sector has not been immune to the financial strains experienced by Dobbies and Homebase. Factors such as the cost-of-living crisis and adverse weather have compounded challenges for the sector. According to Amy Stubbs of British Garden Centres, the season’s poor weather has disrupted expected trading peaks: “It’s never really felt like the season has properly started,” she remarks. GlobalData analyst Emily Salter notes a decline in the DIY market, which overlaps with gardening, picking up a negative momentum from the COVID-19 lockdowns and weakened housing market, subsequently impacting consumer spending on home improvements and gardening.
Amidst these challenges, there are glimmers of hope for the sector. Economic indicators, like the recent increase in house price growth reported by Nationwide Building Society, could herald a rebound in consumer demand. Improvement in the housing market often translates into greater expenditure on home-related products, a potential boon for garden centres. Both Dobbies and Homebase may capitalise on such trends if sustained economic recovery occurs.
The continued recovery of the housing market could potentially revive the fortunes of UK garden centres amid persistent economic challenges.
