The chronically depressed (and increasingly puzzling) state of the UK housing market has much to answer for.
Most topically, the listless condition of Texas Homecare. Of course, there has been talk of overcapacity and the need to shed one or two major players in the DIY sector for some time now – Do It All being a favourite for rationalisation. Texas would make an equally good break-up candidate.
But why right now? Why should Sainsbury, Britain’s most successful food retailer, make a play for Texas Tom just as interest rates – and presumably mortgages – are about to lurch, yet again, in the wrong direction?
The argument for intervention is largely strategic. Sainsbury seems to reason that the deplorable state of the DIY sector has as much to do with the bankruptcy of current thinking as general market conditions. Too many of the players are owned by companies which, like Ladbroke in the case of Texas, are inefficiently focused. Not so Sainsbury, which, painfully aware of the over-shopped nature of its traditional market, is now seeking to develop a strong second suit through Homebase.
Superficially, the successful Homebase recipe – specific targeting, relatively upmarket, woman-oriented and margin efficient – appears ripe for wider distribution than its existing 82 stores. And Sainsbury’s retail distribution skills will come in handy in the event of a large-scale takeover.
But 200 Texas stores, as is the speculation, seems an awful lot to swallow at one time, even for Sainsbury. Added to which, the new and promising Texas strategy masterminded by chief executive John Coleman and marketing director Peggy Coleman, is angled at 180 degrees to that of Homebase. It is centred more on the heavy “male” end of the DIY market; more project and less furnishings-oriented. And much more price-led. How these conflicting strategies are to be reconciled in a way that avoids major upheaval is unclear.
Tactically, in Sainsbury’s favour it can be said the time is probably right to catch market leader B&Q wrong-footed, given the continuing weakness of its parent company, Kingfisher. The advent of US Home Depot is an imponderable – the wild card in the pack. It could end up as another pop gun threat like CostCo. But what if it doesn’t?
Cover story, page 38