Profits drop at Travis Perkins as costs surge.
Travis Perkins’ share price dropped 7% this morning as the group reported a fall in full-year operating profits, particularly affected by an 18.8% profit fall in its Consumer division, hit by increased operational costs and currency fluctuations. Travis Perkins will look back at 2017 as a year of two halves, with Consumer division revenue growing 7.3% in H1, but slowing in H2 with growth of 2%; Q4 was especially tough with consumer like-for-likes down 2.6%, mirroring slowdowns at other big-ticket etailers such as Carpetright and ScS. Despite sister brand Toolstation achieving sales of over £300m for the first time, Wickes felt the pinch of a subdued DIY market.
Wickes refurbished 94 stores, enhancing the kitchen, bathroom and trade areas by the end of 2017. However, a good H1 for kitchen and bathroom was offset by a disappointing autumn period for showroom sales, as constrained shoppers cut back and a promotion that ran during the second half did not resonate with shoppers. Wickes is taking steps to address this, by focusing on improved customer service through extra training for kitchen and bathroom design consultants, contributing to a positive start to 2018.
Toolstation, on the other hand, had an excellent second half of the year and this is likely to continue in 2018, as improved delivery service (5 to 6 days a week in 2017, with the aim of 7 in 2018) and everfalling click-and-collect times will attract both retail and trade consumers who hold convenience as the key factor for retailer choice. However, despite 40 stores opening in 2017, (295 total by end of 2017) and 40 more planned in 2018, sales per store remain well below the bar set by Kingfisher-owned close rival Screwfix.
2018 is forecast to be as challenging as 2017. However, the Travis Perkins fascias are more resilient than competitors B&Q and Homebase/Bunnings to underwhelming DIY spend and the growing ‘Do It For Me’ trend, largely because of their higher share of trade sales.
Source: GlobalData 28 February 2018
February 2018