Travis Perkins warns on profits as its DIY chain Wickes suffers from cash-strapped Brits delaying home improvement projects
- Travis Perkins swung to a £112m half-year loss after writing off £246 on Wickes
- The group downgraded its profit forecast amid waning consumer confidence
- Same store sales slid 7.7 per cent at DIY chain Wickes, which is now under review
- Travis Perkins shares slumped 8 per cent on the news
Tool hire and building materials firm Travis Perkins said today its full-year profits will be at the bottom half of analyst expectations as its retail arm Wickes limps along in a weak home DIY market.
A fall in the number of homeowners splashing out on major projects, like kitchens and bathrooms, led to a 7.7 per cent decline in like-for-like sales at Wickes in the last six months, while profit at the chain shrunk by £14m.
The group, which also runs trade-facing units and Toolstation, swung from a £183m profit to a £112m pre-tax loss, after writing off £246m against goodwill at Wickes.
The Travis Perkins-owned DIY chain Wickes has more than 230 stores across the UK
The downgrade triggered its share price to drop more than eight per cent in early trading. Shares in B&Q and Screwfix owner Kingfisher also fell more than 2 per cent in sympathy.
‘Against a backdrop of changing market conditions which are expected to continue for the foreseeable future, the group has commenced a comprehensive review of its business, with a view to driving stronger performance and enhanced value for shareholders in the medium term,’ said Travis Perkins boss John Carter.
A number of cost saving measures have already been identified at Wickes, including cutting more than a third of its head office roles.
It’s shaping up to be a dismal year for home and DIY retailers, which got off to a terrible start when the freezing weather hurt sales during the critical Easter trading period.
The firms that sell expensive, bulky items such as furniture, kitchens or tools are particularly vulnerable to the ongoing economic uncertainty too, which makes shoppers nervous about spending large amounts of money, or starting costly home improvement projects.
DIY chains are struggling amid tough conditions as shoppers swerve costly home projects
Consumer confidence falls again in July
Consumer confidence is showing no immediate sign of recovery as, according to the latest findings by GfK, it slipped 1 point to -10 in July, with the feel-good factor from sport and warm weather failing to materialise.
The report contained more bad news for big ticket retailers too as the major purchase index fell into negative territory to reach -2.
A number of Wickes’ peers are feeling the heat: B&Q reported falling sales at its last update, floorings specialist Carpetright is closing nearly 100 stores, and Homebase was handed over to private equity firm Hilco after Wesfarmers took a £454m hit on the chain and walked away from the venture altogether.
The company is due to update investors on its strategy in December when, according to AJ Bell investment director Russ Mould, the long-term position of Wickes within the business may be a key talking point.
Carter flagged that Travis Perkins’ trade-focused businesses were showing ‘encouraging momentum’. Sales across the group rose 4.2 per cent.