Home DIY Tips Predicts Better Times Ahead for the Home Furniture Industry

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Sofa retailers have been hit hard but keep their fingers crossed with the summer ahead.

Home DIY Tips takes a look out the current state of play for the UK home furniture industry. 2011 has been a hard time for many high street retailers with the continued economic downturn seeping unpredictability into market expectations, slamming consumer confidence and disposable income. This is especially the case for high street furniture outlets and who, like everyone else, have been hit double by rises in VAT.

It is hard times for independent retailers as credit availability and finance options are being tightened as banks strive to correct their balance sheets. Many larger Furniture stores like DFS have been swallowing up small independent stores over the past couple of years, but now they themselves are seeing their bottom line profits being hit hard, recording slowdowns in the first quarter to 1.8% sales growth. DFS have remained positive and have increased credit facilities and opened several new stores in response hoping that sofa sales will continue to pick up soon.

At the same time VAT has risen from 17.5% to 20% in January, giving retailers not just an administrative headache but also reduced margins. Sofa retailers are battling it out in so many sales offers to attract the little demand out there that many consumers are losing confidence in the quality and trustworthiness of these deals, and holding back. Let’s also mention that it is not just sofa retailers who are being hit hard; other sectors particularly affected by the downturn and rise in VAT include estate agents, electrical and entertainment advisories.

But it is not all doom and gloom on the high street. Next have recently raised profit forecasts after a stronger period up to Christmas. Furniture sector sales are argued by some analysts to return to strong sales over the next three to five years. Can furniture retailers hold tight till then? Well if companies have managed to blow out the storm so far then they have seen off the worst of the bad weather. Some analysts predict a second blip but it seems the UK government, along with global sentiment, is bailing out the UK economy at all costs, and thus seeing off any unwanted second blips. How this manifests itself in rising interest rates is a cause for concern for furniture companies struggling to make interest payments, but we all hope that people have seen this coming and have planned ahead.

With the summer ahead and events like the Royal Wedding, consumer spirit is expected to lift, so let’s hope this is good news for furniture and sofa businesses, and retailers in general.

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David Harling
sam.baker@digivate.com
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