DIY – Can’t someone else do it?
Anthony Lynch, portfolio manager of the JPM UK Equity Plus Fund, JPM UK Equity Core Fund & The Mercantile Investment Trust, discusses the UK repair, maintenance and improvement market, and the generational change in attitude.
Meet my Dad. He’s a British homeowner who claims to just about remember England winning the World Cup. He spends his weekends gardening, fixing things and working on various long-term projects that never seem to end (such as a soak away for surface water in the garden that left our football pitch looking like a scene from the Somme for about 18 months). If a tap breaks he’ll replace it and if he finds a bare wall he’ll stick a few shelves up on it.
Now meet me. I spent several years renting before becoming a homeowner. I don’t trust myself to touch electrics or plumbing and I’m never particularly comfortable drilling into a wall. When I was renting a flat we’d call the landlord if something went wrong and we just never really broke that habit.
And it’s not just in my family that we’ve seen this generational change in attitude. Members of today’s“Generation Rent” expect their rented flat to be in a liveable condition. If anything goes wrong, then that’s the responsibility of the landlord. No one wants to rent a “doer upper”. And even when we do buy a property, we might go so far as to paint a wall or two, but in reality its often cheaper to pay a professional who will do it well rather than book a day of holiday, buy all of the tools/ brushes etc and then do it badly.
The investment implications of these trends are profound. While the overall UK repair, maintenance and improvement market isn’t undergoing a period of material growth, below the surface there are some very clear winners and losers. Fewer consumers are shopping in B&Q, Homebase and Wickes* Instead, tradespeople are spending more at Screwfix, Tool Station, Selco and other chains focused on minimising store linger time and offering the best possible prices. The evidence can be seen in the like-for-like revenue growth track records for the various brands—and in turn, for the companies that own them.
By investing in businesses with more of a focus on the trade customer than the DIY enthusiast, and by not owning or shorting those companies that are more reliant on their legacy consumer-focused brands, we’re able to mitigate some of the macro risks (consumer confidence, currency etc) and simply identify winners and losers within the sector. This is the approach that we look to take across all sectors in our Equity funds range.
*The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell.
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