February 2013: Much has been written about how the garden centre industry had a tough year in 2012, battling a perfect storm of economic fragility and extreme weather conditions. Having entered the New Year with vast areas of the country underwater and, more recently, under a blanket of snow, the industry is now holding its breath hoping that 2013 will be an improvement on 2012.
The HTA reported garden centre sales for the first half of the year 11% down year-on-year which many consider to be an achievement given trading conditions. Many garden centres rallied towards the end of the summer and year-end trading provided some welcome relief with early December reported as the busiest of the year for many garden centres with sales figures up 2% on 2011. Some centres have claimed to have caught up with the spring losses, hitting last year’s turnover figures. Most centres are down like for like however – the first time ever for many. Performance varies across regions with the South East appearing to have been hit particularly hard, attributed mainly to the weather.
The fundamental message appears to be that there are no underlying issues and that the industry, on the whole, is in rude health. Trading comparisons between 2011 and 2012 should be tempered with the fact that 2011 was a hard act to follow when garden centre retail enjoyed unprecedented growth of 20%. The private equity firm Terra Firma showed how it valued the potential of the industry when it paid £276 million for the Garden Centre Group (TGCG). With a new Chairman and Managing Director on board, last year was a period of consolidation for TGCG and now the industry waits to see what the next steps will be from the UK’s largest garden centre group.
Demand for new centres continues and values are holding up. This has been supported by major deals over the past 18 months as the sector continues to consolidate. Last year Grosvenor Garden Centre was taken over by Blue Diamond – one of the largest single site transactions for many years. More recent evidence is the high level of interest attracted by the sale of Whiteleys Garden Centre near Huddersfield. Whilst below open market sale levels, due to the forced sale situation, offers received did not indicate a drop in values. Private sector confidence remains strong with many owners looking to expand and demand continues right across the country in particular for garden centres capable of achieving sales of over £2 million.
In the medium-term fundamentals remain positive for the garden sector industry. Undoubtedly operators will have to hone their operations and focus on making their offering as attractive as possible to keep customers flowing through their doors. However, even with everything that has been thrown at the industry, it is still performing well in comparison to the alarming number of high street retailers going into administration in the first month of this year.
Mike Gilbert, Partner
Gilbert Evans was asked by leading property magazine Estates Gazette to co-author a ‘state of the industry’ article with legal practice Bristows. This can be read at https://gilbertevans.cometotheisland.com/cms/how-does-your-garden-centre-grow