Toolstation owner Travis Perkins is focusing on strengthening its trade customer relationships by offering convenient service through both physical and digital channels. This comes at a time when DIY shoppers are spending less with it in the wake of the pandemic.
The builders merchant business says that its trade business is growing strongly, but that the high levels of DIY sales that it saw during last year’s pandemic lockdown, particularly at Toolstation, has since subsided. It says that rising energy costs are now the main driver of product inflation – running at 15.3% – since supply chain and stock issues are now generally back to normal.
The update came as Travis Perkins reported revenues of £2.5bn in the six months to June 30. That’s 10.3% higher than the same period last year. Like-for-like sales were 7.9% up on last year – but lower than the 44.1% LFL growth that it reported a year earlier. But pre-tax profits of £136.6m were down by 6.2% on £145.7m a year earlier.
Merchanting sales grew by 13.3% to £2.2bn, with LFL sales growth of 11.7%. That’s behind the 47.3% LFL growth of a year earlier. Its general merchant business saw sales grew by 12.2% while its specialist businesses – which account for 40% of its merchanting business and include Keyline, BSS and CCF – saw sales grow at 15.1%. However, price inflation, running at 15.3% throughout the half-year, was a larger part of that sales growth than originally expected. “Whilst in the first half of 2021 inflation was driven by product shortages, supply chains and stock levels have largely normalised and the current wave of inflation is predominantly driven by rising energy costs being passed through from manufacturers,” Travis Perkins said in today’s figures. Adjusted operating profit in its merchanting businesses came in at £170m, up by 9% on the £156m it reported last year.
Toolstation sales fell by 4.6% to £376m, with LFL sales 10.6% behind last year, when they had grown by 29.8%, as DIY sales reduced in the wake of the pandemic. A year earlier, DIY sales had peaked during lockdown. It reported an operating loss of £8m – down from an adjusted operating profit of £10m last time – following investment in new branch openings in both the UK (+19 to 549) and Europe (+20 to 143). In the UK alone, it reported an adjusted operating profit of £7m, 65% down from £20m last time, while in Europe it reported a £15m loss that are expected to widen to £30m in the full-year.
Travis Perkins chief executive Nick Roberts says that while its trade-focused builders’ merchant businesses performed well during the first half, Toolstation had returned to primarily serving trade customers in the wake of the pandemic. “We remain as confident as ever in the long-term growth potential of the business and in our UK investment programme, whilst also increasing investment in Toolstation Europe to take advantage of the opportunities we see in those markets.
“Whilst we are cognisant of the current macroeconomic uncertainty, our diverse end market exposure, broad trade customer base and strong balance sheet provide resilience against changes in market conditions. The strong performance of our Merchant businesses is set to continue into the second half, driven by our agility in managing inflation and by our leading service propositions. This will be offset by a combination of the normalisation of Toolstation’s customer base and the increased investment in the Toolstation growth opportunity in the UK and Europe. As a result, we expect the group overall to deliver a full year performance broadly in line with market expectations.”
Toolstation multichannel strategy
The focus for Toolstation is now on using convenient service, both in-store and via digital, to build relationships with its core trade customers. That convenient service is focused on ordering, fulfilment, payment and stock availability. In the last two years the retailer has opened a net 140 new branches in the UK with 20 opened in the first half. It expects to open a similar number in the second half as it works towards a medium-term target of 650 branches. In Europe, where first half sales were 7% ahead of last year, its 143 shops include 86 in the Netherlands, 14 in Belgium, and 43 in France.
Online, the retailer reaches customers via its app – which now has about 250,000 active users. It reports that trade credit accounts more than doubled in number in the half-year. Its European businesses are now working more closely with the UK business to speed up the adoption of digital and business process improvements that are developed in the UK.
Toolstation is a Leading retailer in RXUK Top500 research where Travis Perkins is ranked Top100. o