Market Monitor - Consumer durables - Italy

• Modest growth expected in 2016
• Concentration process on-going in the market
• Special attention paid to fraud issues

It is expected that Italian consumer durables retail will grow modestly in 2016, as private consumption is forecast to increase 1.4%. Both demand and profit margins are expected to remain stable.

Due to its dependence on real estate, the furniture subsector has suffered yearly declines until 2014, despite decreasing sales prices (down 40% over the last six years). A rebound started in 2014, but is still insufficient to compensate for the decline seen in previous years.

In the household appliances segment a modest rebound was registered in 2015, partially sustained by some public incentives for the replacement of white goods.

Competition in the consumer durables retail sector is very high, and this is leading to market adjustments: weaker players with poor financial strength have disappeared while other businesses chose to merge with other peers in order to survive. The on-going concentration process is expected to continue until a new balance is reached in the market (compared with many other EU countries, Italian retail businesses are, on average, small). The share of sales done online is increasing further.

Payment terms generally range from 60 to 90 days. Payment delays decreased in the H2 of 2015, but are expected to level off in the coming months. No major increase in insolvencies is expected in 2016.

Our underwriting stance for consumer durables retail will remain generally cautious, due to the still shaky rebound of household consumption and because smaller players often lack the critical mass for long-term survival in a highly competitive environment.

Special attention is paid to fraud issues that occur in the electronics retail segment, with some small businesses reporting very good financial results while the performance is not in line with the industry trend.