Multichannel DIY retailer Wickes is operating in a “challenging” market as sales slow in the DIY, kitchen and bathroom market and competitors cut prices, its parent company Travis Perkins said today.
Travis Perkins said that pressure on prices had begun to ease in recent weeks and that kitchen and bathroom orders were showing early signs of recovery. However it remains cautious as indicators such as housing sales, house prices and consumer confidence “continue to paint a mixed picture”.
The update came as Travis Perkins said in a third-quarter trading update that its total sales grew by 3.9% in the third quarter of its financial year, with like-for-like sales up by 4.1%. But while its merchant businesses, which serve tradespeople directly, saw like-for-like sales grow by 7%, like-for-like sales at its consumer businesses fell by 4.2%, and total sales by 1.8%.
The consumer division includes Toolstation which saw strong like-for-like and total sales grow, as its store network expanded.
Travis Perkins chief executive John Carter said: “Our trade-focused businesses delivered good sales growth against a challenging market backdrop,backdrop, including successful recovery of cost price inflation. The UK DIY market continues to be very challenging for Wickes, where significant price pressure and weak consumer confidence is providing a tough trading backdrop.
“Across the group we are making good progress with the cost reduction activities that were highlighted in July, and these actions are generating positive results and underpin our confidence that our full-year performance is on track and in line with market expectations.”
Commenting on the statement, Matt Walton, senior retail analyst at data and analytics company GlobalData, said that consumer sales at Wickes was Travis Perkins’ weak link. “Unlike either B&Q or Homebase, the hot summer did not help Wickes as its limited gardening offer focuses on outdoor structures, which is less dependent on good weather. The growth of price-focused retailers like Wren, Howdens and online bathroom specialists including Victoria Plum and Soak.com impacted Wickes’ kitchen and bathroom sales, though it said that it had seen ”early signs of a recovery” in kitchen and bathroom in recent weeks.
“Wickes has had a disappointing 2018 so far but its proactive nature on space and online mean it is in a stronger relative position than Homebase and B&Q which are both attempting turnaround strategies in challenging conditions. Wickes is focusing on service to continue its recovery in kitchen, capitalising on B&Q’s decision to discontinue its installation service, by hiring over 100 former B&Q fitters. Plans to cut central costs are progressing as planned helping Travis Perkins to remain on track to meet market expectations.’’
Wickes is not the only retailer in its sector to be feeling pressure in the current financial climate. The update comes soon after homewares retailer Wilko reported a move into the red following losses on derivatives and exceptional items. Its turnover grew by 7.1% to £1.6bn in its 2017/18 financial year, with online sales up by 47%. But while operating profit before exceptional charges, came in at £13m, down by £5m on last time following investment in stores and IT infrastructure, the bottom line, pre-tax losses came in at £65m. Among other factors, cost pressures had come, it said, from the impact of Brexit, and increased costs of the national living wage, the apprenticeship levy and business rates.
In its strategic update, at the retailer, which trades from 415 stores and online, said that it planned a transformation programme that will take it “from the current retail environment to a future where consumers will continue to demand more, both in terms of quality and experience, for less money and effort.”
Wickes is a Leading trader in IRUK Top500 research, while Wilko is a Top50 trader and Toolstation is ranked Top100.
Image courtesy of Wickes
