UK Market Insight May 2019

This will be really “old news” by the time you read this – writing this in early March, with daily Brexit updates, showing no progress at all – it’s all very boring.

I take heart from the fact that the pound has strengthened against both the dollar and the Euro. Why? Some money traders somewhere know something we don’t! At this point in time a hard Brexit appears to be the most likely outcome – but do I really believe that? I’m honestly not sure what I believe anymore.

Sadly whatever the outcome, the division that is now so evident in our country, in every walk of life, is set to continue and perhaps get worse. Whether the deadline is extended, whether we go for a ‘People’s Vote’ or leave under any deal or no deal – the sad result is that our society is divided and the divisions will take a long time to heal.

As I commented in my last missive – the UK will survive and prosper. We will overcome but there is no doubt that, in the meantime, we have been damaged in so many ways – not the least our economy and our reputation.

So how are things? The economy is not doing too bad and certainly, a lot of the Remain doom-mongers have (so far) been proven wrong in many ways. The tax revenues in January were up significantly, giving the Government a perfect opportunity to buy (bribe) some votes – that aside, it’s a good indicator. Another positive is the pre-Brexit boost that the stockpiling fraternity are creating (can you really believe that people are stockpiling?). Although that chicken will come home to roost post-Brexit (if there is indeed a post-Brexit).

Consumer and business lending has grown, house prices are marginally ahead of forecast and consumer confidence remains ‘stoic’ despite all the concerns. Shop prices have started to increase (weak pound implications filtering through) and new mortgage approvals nudged upwards – these are all positive indicators. Just think what we could be achieving if it were not for Brexit bollocks?

I spoke to Matt at H2O in Dorset. The weather recently has been very warm (20 degrees + in February) so if you are a specialist watersports retailer like Matt, it has been a Godsend. “Yeah – it’s been really good. People are thinking about getting back on the water – this stimulates interest and some sales. It’s not manic but it does mean that we have actually had our best winter ever. Paddleboarding interest stayed solid through the whole winter.”

So what about your other watersports or is it all paddleboarding? “Kite and windsurf are good when the wind blows. Last summer was a bit slack but they’ve picked up nicely through autumn and winter – particularly kite, which has been good.”

And wetsuits? “It’s flat and has been for years – the wetsuit business has gone like clothing – it’s an online purchase primarily. We’re not out of it by any means but we don’t want to get into the silly price wars that haunt the wetsuit market. Plus we’re not set up for the ‘buy-3-send-2-back’ customers. It’s just not our bag so we are sticking to what works for us.”

So confident and optimistic then? “Yes I am – particularly about paddleboarding and particularly about H2O. We’re storming ahead and set to increase business and continue to take market share. The only negative I see is Brexit. It’s disruptive at the very least and could be a nightmare at worst. I never saw the reason for it and it bothers me both personally and from a business perspective. It just makes me wonder how well we would be doing if it were not for all this stuff – how good could it be?”

Echoing my thoughts exactly.

H2O is a traditional bricks and mortar business that have developed their online business really well. Freestyle Xtreme, on the other hand, are an out and out online business with no B&M interest. They first started in 2003 selling MX and lifestyle making their first move into snowboarding in 2014.

“We were all snowboarders and it was a heavy influencer in our lifestyles so it made sense to complement our SS business with an AW business as well,” this is Jake, one of the owners. “Snowboarding is now one of our biggest categories and we love being part of the industry.”

So how was 2018? “As we all know it was not an easy year for UK retail but actually it turned out to be a pretty good year for us. So far 2019 has been great and new categories introduced in 2018 are gaining ground.”

Anything, in particular, going well? “Snowboard, MTB and skate all saw huge growth so these are real areas of focus for us going forward. Recent introductions such as freestyle ski and surf really complement our existing portfolio and show good opportunities for the future. We really want to offer technical products and brands and cater for the full spectrum of action sports. It’s developing well.”

So are you buying for growth? “Yes, absolutely – we’re ambitious and growing. Brexit has presented challenges for us but we’re working through them and have contingencies in place to ensure we safeguard our business including opening a second warehouse in Slovakia.”

Freestyle Xtreme are HQ’d in Bristol – 240 miles east you find Norwich and Chris from Snowfit who was pleased with how the season has gone so far. “Considering all the negatives in the market, and by that, I mean the uncertainty caused by Brexit. We’re virtually on par with last year and that, to me, is actually a good result. Right now [March] it’s very quiet – the February half-term has been and gone and the weather has made people think of Spring rather than snow which is annoying but nothing that we can do about it.”

Anything going well in particular? “Boots – both snowboard and ski boots have gone well – really pleased with that. And helmets and goggles. Always surprised by how many helmets we sell and goggles have almost sold out.”

So how is your approach to your ‘buy’ for next year? “Cautious. Very cautious. I will be buying 30% down.”

I can feel another Brexit volley coming in. “We have to be cautious and there’s a couple of reasons. Yes – Brexit is a big part of my thinking. How can it not – I’ve got suppliers who have not fixed their pricing which makes it impossible to buy plus, being frank, it un-nerves me. Secondly, I’m keeping some cash back to take advantage of over stocks. Every year we have someone come through with too much of this, too much of that. Next year I am going to be ready to take advantage of it. If I cannot get more of the brand I want then there will always be something, somewhere I can get.” Chris was talking to a distributor and he pointed out that this was not music to my ears. It was not!

“I know you don’t want to hear that but for this moment in time I think it is the right thing for Snowfit to do.”

Reading this back you may get the impression that Chris was being a bit pessimistic – but he was not at all, “I know that there is a lot conspiring against us in the winter sports market – indeed against the UK – but I still think that our business will prosper.”

You know something. Brexit bollocks apart – he is right. We are going to prosper (If you say it often enough and loud enough…).