The risk of a downturn in the domestic real estate market could dampen higher growth prospects in the furniture and domestic appliances segments in 2017.
- The Swedish retail sector has been growing faster than national GDP over the past couple of years, and is expected to increase 3.5% in 2017, again driven by robust private consumption and population growth.
- The consumer durables retail segment has benefitted from low interest rates, a strong home furnishing trend and increasing real estate prices. However, the risk of a downturn in the real estate market could dampen higher growth prospects in the furniture and domestic appliances segments in 2017.
- Retailers’ profits are expected to remain stable or decrease somewhat in 2017. While price wars within the electronics retail sector have subsided, there are signs of increased competition in the sports retail segment. Currently, furniture and fashion/textile retailers also face difficulties due to tough competition. Exchange rate volatility has some effect on consumer durables importers and exporters.
- Payment duration in the Swedish consumer durables retail industry is 45 days on average. Non-payments are not expected to increase in 2017, while retail insolvencies are forecast to decrease after a 4% increase in 2016.
- Newly founded businesses, in particular, face higher risks in the highly competitive market. Online retailers generally enjoy good business prospects, as there are still growth opportunities in segments with low market penetration. Swedes increasingly embrace shopping online, and the online segment is expected to continue to grow in the years ahead. The effect of growing e-commerce and that of stores relocating to large shopping malls and out of towns will continue to shape the Swedish consumer durables retail sector.
- As in 2016, our underwriting stance remains generally open for household appliances, while it remains neutral for furniture and textiles.
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Market Monitor April 2017
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