Wickes hit by tough second half of 2017

Travis Perkins announced their full year results earlier today and in this report, we focus specifically on the performance of Wickes Building Supplies.

Download the Travis Perkins Group results announcement here.

Like-for-like sales growth at Wickes slowed through the course of 2017 as the UK DIY market became increasingly challenging and the business had a disappointing autumn Kitchen & Bathroom (K&B) showroom promotional period.

Following strong sales performance, particularly in K&B showroom, in recent years, Wickes invested significantly in additional capability to service continued growth in 2017. In the first half of the year this momentum continued, with strong K&B sales offsetting a challenging core DIY market. The application of a different promotional methodology for the autumn K&B showroom sales period between September and November was unsuccessful, and the level of expected sales growth was not achieved over this period.

Given the higher operating cost base in Wickes in 2017, the division experienced negative operating leverage, resulting in a fall in operating profit, excluding property, of £19m, to £82m (2016: £101m), and a 150bps decline in operating margin, excluding property, to 5.2%.

Read - Toolstation sales exceed £300m.

Significant cost reduction activity was carried out in Wickes in late 2017 to right-size the cost base to volume achieved, with £8m of costs eliminated by the year end, and more to do in 2018. This has resulted in a more appropriate cost base for 2018, but it was too late to offset the additional costs that had been built into the business in 2017.

Additionally, K&B showroom promotional activity has now been refined, including extra training for design consultants. This has resulted in a stronger start to 2018.

The Wickes store refit programme continued at pace, with 27 additional stores bringing the total refitted to 94 by the end of 2017. With the benefit of an enhanced K&B showroom, better laid out trade areas and better category adjacency the refitted stores show a significant performance improvement over those stores remaining in the old format.

However, the programme to open additional stores and refit existing ones has been slowed in 2018 given a challenging UK DIY market.

A cost efficiency programme is in place for 2018 to tightly control overhead costs with the aim of offsetting operating cost pressure from wages, rates and depreciation.

The TradePro card was launched in Q3, giving trade customers specific trade deals, including regular discounts on Mondays. Early customer reaction has been positive, with an uplift in trade sales and the attraction of new customers.

Download the full year results presentation here.

Source: Insight DIY Team & TP Results Statement.

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