Wickes parent Travis Perkins warned this morning that the home improvement retailer’s profits will be lower than expected due to a weaker consumer backdrop in the UK’s DIY market.
Shares dropped more than eight per cent in early trading.
The business, which also has several trade-facing units, reported like-for-like revenue growth of 4.2 per cent for the six months to the end of June.
The group swung to a pre-tax loss for the first half of £112m, compared to a profit of £183m the previous year.
This was as a result of a £246m write off of goodwill in Wickes. Adjusted pre-tax profits excluding the charge slipped by 4.6 per cent to £167m.
The group maintained the dividend at 15.5p.
Wickes sales declined by 5.8 per cent in the first half of the year, or 7.7 per cent on a comparable basis. Adjusted operating profit dropped by £14m.
Why it’s interesting
The results from Wickes mirror trends seen across the sector, most notably during the poor weather in the early part of the year. This caused DIY and garden retailers to post lower sales than usual, as consumers stayed inside during key trading periods.
Wickes has not recovered as well as had been hoped since then. As a result it has taken steps to reduce costs, cutting its head office staff by a third. Travis Perkins has also begun a review of the overall business.
This might lead to speculation that Wickes will be sold off like its peer Homebase, which was flogged to HMV owner Hilco not long after its owner Wesfarmers posted a £454m writedown on the business.
The pessimistic view of the DIY market in the Travis Perkins update also impacted B&Q owner Kingfisher‘s share price this morning, pushing it down 2.8 per cent.
What Travis Perkins said
Chief executive John Carter said that the group’s trade-focused businesses were showing “encouraging momentum”, but that Wickes’s profitability had een held back by consumer spending trends and competition.
“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,” he said.