Hornby consider further price increases

this is utterly bonkers in my opinion.

they are trying to increase revenues and by increasing prices! then they talk about market erosion!!

this may make the short term balance sheet look good but it must be very bad news for the company.

I am sure there is a metaphor for this!

I haven't bought a new (top of the range as opposed to railroad) loco in a year. £100 is simply too much to spend on a hobby.

There are so many wasted opportunities in that company. I cant help thinking that they only have themselves to blame. The international range is vast and was full of perfect train set models that would have sold like hot cake. Then they stuck a £180 price tag on them! its just crazy. The TGV trailer cars have about 6 pieces in total. So why in the name of all that's holy do they try and sell them for more than a Hornby teak? They should be about a tenner. I don't mind high prices but I object very strongly to being treated like a mug.

I suspect it might be even worse than these figures suggest. I think there was more than a little profiteering going on with last years price increases. and obviously that didn't work.

Peter

If your costs are in US dollars /Chinese yuan, then if sterling falls against the USD, the sterling price must rise pro -rata. It's not that the price/cost in the currency in which they are made have changed

Certainly this will mean fewer sales in sterling markets, but that's the way devaluations work to reduce imports. However that's only one part of Hornby's business now - in so far as the euro has fallen only modestly against the USD/yuan , their prices in euros for Jouef/Lima/Rivarossi/Arnold/Electrotren will only be modestly higher . While their HO prices are substantially higher than we're used to they are lower than other manufaturers in those markets. I remember seeing a comment on the Loco Revue forum when Hornby rereleased the Jouef range - "la retour du Jouef democratique!": it was about a 20% cut on the prices from Rivarossi before they went bust. If Jouef prices are now back to where they were in the latter days of Rivarossi 5 years ago , no doubt that market will live with it as it did before

Sterling, thanks to devaluation, is another matter

I expect that Hornby's main focus will be on medium term survival - if their costs (as expressed in sterling) rise sharply they have to recover them through higher prices. Interestingly , the BBC website report is has a much more positive take on the announcement - Hornby's sales haven't collapsed, they are still within the range of the profit forecasts, if they face cost pressure they will be recovering it .

The slump in their share price suggests the City (in pessimistic mood) was assuming a collapse in sales ,and a collapse in profit as costs soar

Price increases will cost volume, as German HO has amply demonstrated, but if the costs are climbing prices will follow - I don't think this is profiteering or increasing margins, just attempting to limit the damage to margins in the face of rising cost . If you express the increased sterling price in US dollars, at the current exchange rate , you'd probably find the USD price is actually lower than it was 12 months ago.

"The pound in your pocket.." and all that

No doubt we will see exactly the same from Bachmann , who have their costs in the same currency

QUOTE (Doug @ 27 Jan 2009, 09:27) <{POST_SNAPBACK}>.. One wonders is consolidation and redress is a better option.

Do they have a long term goal? Does that goal favour shareholders or customers...?

Do we just accept these price rises?
That we accept higher prices is the gamble Hornby have to take. Pitching it just right so that there is enough perceived value to keep customers buying, enough revenue to satisfy shareholder requirements for dividend and share price growth.

There's nothing much to consolidate, if Hornby are running the typical development and marketing business model engineered to suit the economic conditions that just went belly up. 'Hornby' as an asset is a package of intellectual property rights, tooling and expertise. The UK buildings may well be leased, the production of the physical goods is fully contracted out, the money to buy the production runs probably borrowed. It's all geared to the 'lean and mean' high return on assets ratio method of business operation, that worked spectacularly well when credit was cheap and readily obtained.

Without getting too much into a financial debate I think there is too much comparison between the UK & (mostly) German markets. The markets are very, very different & the one thing that tends to get overlooked often is the fact that three of the major German companies were, until recently family owned & run.

A business, largely family run is very different to a plc.

Manufactures, especially when plc,s are in the business of making money & are responsible to their shareholders - they will price their products based on a fine ballacing act between what the market can sustain & what they need to make after they have paid for their goods. If they make too little the shareholders whinge, if they make too much the purchasers whinge. If they get it wrong substancially either way they will not be popular with one or the other.

Time will tell.

Other forums carry similar threads to this, it all makes interesting reading and I am repeatedly amazed at the stances taken by some forum members.
Things may be different down here in the sunny south but I have yet to be manhandled into a model shop and forced to purchase an item. Some modellers seem to take the view that if there is a particular model released that they would like or which fills a gap in their layout/collection they have a right to buy that at a price they think is reasonable. Why would this be? I would like a Bentley, I do not berate Bentley for charging more than I can afford for one of their cars. There are Brawa and Trix models I would like that would go well with some I already have, they are expensive compared with British outline so at present I will not be adding to that part of my collection. But I don`t criticise these manufacturers because I don`t have to buy the stuff, it`s nice to have rather than must have. I have no fundemental right to buy a model locomotive.

If Hornby and others get it wrong they will go bust, as far as I am aware there is no supreme law that says we have to have model railway manufacturers operating for the benefit of the hobby.

Les

QUOTE (Doug @ 27 Jan 2009, 09:27) <{POST_SNAPBACK}>Like it says at the top, Hornby are focusing on maximising revenues now - A bit of a rough statement for the customer in these times, One wonders is consolidation and redress is a better option.

Do they have a long term goal? Does that goal favour shareholders or customers...?

Do we just accept these price rises?

I think its a problem we as consumers will face in more and more markets as time goes on.
Canon are doing a similar thing with their higher end cameras, so much so that they have, it seems, almost deliberately delayed further imports until the official price rises hit on Feb 1st , with a consequence that you cannot purchase a large proportion of SLR lenses in this country at the moment, even if you wanted to beat the impending announced price rises.

The problem is we have gone from 200 yen to the pound down to 120 , and a similar story in both Dollars and Chinese Yuan.

Now, Hornby may be seen as somewhat mercenary to openly admit to a strategy of maximising revenue, but when they are open to such drastic funding swings, which could in effect see their investment value halved during the course of bringing a model to market, then it is prudent, if not exactly thrilling to us, the end users.

My guess would be its temporary.

Simply because this recession has yet to bite really hard, 12 months further along, when sales have really fallen and the job losses are mounting, you will find most companies desperate to keep some cashflow, and the price cuts will begin.

Not a pretty prospect if you look at the grand scheme, but for modelling as a specific subject, I would personally simply wait to make too many larger value purchases for a while.

We have this debate at regular intervals. Our hobby is a discretionary purchase and we can choose to buy or not. The losers in this case are those with a limited disposable income who will find themselves priced out of the new model market. That is a shame as I have always thought that the hobby is quite democratic and cuts across all social classes united by our love trains.

However, not all is lost. There always seems to be a lot of second hand stuff available at exhibitions, never mind eBay. With a bit of TLC and some inventive modification and detailing some fine models might arise from the ashes of someone's forgotten toy train set. Perhaps it's time for the model railway magazines did a few articles on ways to achieve this transformation?

For those of us still able to pay, maybe we will choose more carefully and buy less often? Collectors will no doubt keep collecting....

David

QUOTE (rossi @ 27 Jan 2009, 21:16) <{POST_SNAPBACK}>Its amazing, Fender Guitars have also increased prices heavily .Although I am not in the market at present as I own a nice Telecaster,it seems incredible that companies raise their price .It makes me wonder that if now no-one can borrow any money,companies are having to actually set some realistic prices to get a return ,They may well be gambling that those who really want their products will still pay good money for them while those who just cannot afford them at any price wont bother anyway .It seems the only logic to it all . Model railways used to be expensive toys that many could not afford .It may well get back to that again .
Martin
Fortunately I still have my 79 Strat and have looked after it.

There are usually a few items I just have to have and some that would be nice to get. I think ourageous prices will knock out those might have got purchases.

The same price increases are also going on with Continental outline so it does seem to be across the board.

There is only so much money you will pay before you start to seriously question the validity of the price. I have hit that point and now have a lengthy think before making a purchase.

QUOTE Like it says at the top, Hornby are focusing on maximising revenues now - A bit of a rough statement for the customer in these times, One wonders is consolidation and redress is a better option.

Nothing new there Doug. Thats why they are more expensive than Bachmann,Vi Trains and even Heljan. Since becoming a plc they've always been in the business of maximising revenues . Another way of stating it is "exploiting the consumer". Thats why you have M7s at £99.99 , Stanier Coaches £38.25 (mysteriously the well detailed Maunsells are £8.50 less expensive ?!?)

As for pleading poverty because of the exchange rate - who decided to move all production to China to make a fast buck . OK while the going was good. Don't recall the price coming down on the UK toolings that were transferred. They were happy to keep the profit then but now that the currency has turned increases have to be passed on to maintain their margin. Who would bet all their company on Foreign Exchange markets? Thats effectively what Hornby did when they transferred all manufacturing to China. They certainly scored in prior years , but the gamble doesn't look so clever now.

Industrialists will tell you its a bad company that resorts to increasing prices to get themselves out of trouble, because they know there is a law of diminishing returns. Increase the price and a proportion of your business disappears. Instead what manufacturers do is seek efficiencies. The best companys drive down costs in these circumstances, to survive in the short term and to maximise profit when the upturn comes. Thats what Hornby should be looking to do now. Oh yes there's a portion of the market that will fork out £100.99 for a T9. File down the front bogie pivot to get it to run properly and be quite happy. But I bet there's an increasing proportion who just aren't prepared to pay this anymore.

Get back to the old standards of value and quality please

Russell

Its is interesting that people see the GBP100 as a make or break point in terms of whether to buy a locomotive or not. The question as to whether it makes a good investment is for others to decide.

Personally I buy the trains that I like and can afford. The price (to a certain extent) is irrelevant. I am not buying them in the hope that when they are sold, I will make a profit on them, I am buying them to play with.

We have recently gone through a fairly benign economic environment where because of exchange rates things were relatively cheap. Potentially we bought an excessive amount which we didn't consider it to be because of this supposedly cheap environment and now we look back less than 6 months and go its got very expensive recently.

The great thing about this hobby is that we don't need to buy anything. Generally speaking we have a lot of stuff, and economic times like this enable us to play, build and enjoy rather than enriching our collection.

Now imagine if Hornby rather than paying out cash dividends gave out vouchers to obtain Hornby product. Would this make you buy their shares?

QUOTE (john woodall @ 28 Jan 2009, 03:59) <{POST_SNAPBACK}>Its is interesting that people see the GBP100 as a make or break point in terms of whether to buy a locomotive or not. The question as to whether it makes a good investment is for others to decide.

Personally I buy the trains that I like and can afford. The price (to a certain extent) is irrelevant. I am not buying them in the hope that when they are sold, I will make a profit on them, I am buying them to play with.

We have recently gone through a fairly benign economic environment where because of exchange rates things were relatively cheap. Potentially we bought an excessive amount which we didn't consider it to be because of this supposedly cheap environment and now we look back less than 6 months and go its got very expensive recently.

The great thing about this hobby is that we don't need to buy anything. Generally speaking we have a lot of stuff, and economic times like this enable us to play, build and enjoy rather than enriching our collection.

Now imagine if Hornby rather than paying out cash dividends gave out vouchers to obtain Hornby product. Would this make you buy their shares?

Quite agree. Through the last 5-6 years since returning to the hobby I have spent thousands of pounds on buying steam locos and rolling stock and now sold it all off, all at a loss.
What I am left with now is a fleet of EWS locos and rolling stock, enough for a 5 road layout 25 x 16 foot. I dont have the layout though but our club does lol.
I now count myself fortunate that there is very little that comes out each year that I say i must have. The only thing on the hornby shopping list is sound chipped class 6 x 4 if they are good (keeping 2 locos + 4 chips selling off other two locos) and a daffodil pullman bar.