Shares in Wickes (WIX) were among the main FTSE 250 risers on Tuesday, bid up 5% to 268.5p. The DIY retailer spun out of Travis Perkins (TPK) in April, surprised investors with a positive trading update.
With sales growth tracking well ahead of last year’s pandemic-disrupted trading but also the same period in 2019, Wickes is guiding for full-year adjusted pre-tax profit ‘within the top half’ of analysts’ £55 million-to-£74 million range.
STRONG SHOWING YEAR-TO-DATE
Group sales have continued to perform strongly year-to-date, with total like-for-like growth in the 21 weeks to 22 May 45.7% ahead year-on-year and up 23.1% on a two-year basis versus 2019’s comparative period.
Wickes said trading was ‘notably strong through April, driven by sales volumes in both local trade and DIY and continued to be underpinned by our digital capability’, although it said trading settled back in line with expectations in May.
Following the re-opening of its Do It For Me (DIFM) Showrooms on 12 April, Wickes has been ‘encouraged by our kitchen and bathroom leads and order pipeline, which is expected to deliver strong like-for-like sales growth in the second half of the year’.
CEO David Wood also addressed the product shortages across the market, a headwind for Wickes and rivals including B&Q-owner Kingfisher (KGF).
‘Availability constraints and inflationary pressures across some raw materials have been well-flagged,’ he conceded CEO David Wood, ‘but we have strong supplier relationships and are working closely with them to ensure we continue to provide customers with the products they need at the best possible value.’
CYCLE OF UPGRADES
Liberum Capital upgraded its year-to-December 2021 pre-tax profit forecast by 22.8% to £68 million and its 2022 estimate by 6.9% to £68.3 million following Wickes’ update.
The broker believes Wickes is ‘in a structural sweet spot where numerous tailwinds should drive multi-year growth ahead of the broader market’ and thinks the group has ‘entered into a cycle of upgrades’.
AJ Bell financial analyst Danni Hewson pointed out Wickes operates in a fragmented market which is benefiting from a post-Covid home improvement boom, ‘so now is a pretty good time to strike out on its own following its split from Travis Perkins.
‘Basically if the company can’t make it work now then it would never be able to. Wickes has exposure to both DIYers and, for those who have accepted their limitations, the “Do It For Me” brigade given its significant business selling to trade customers.
‘There is only a brief mention in today’s update of supply issues despite widespread evidence that the cost and availability of some materials is an increasing problem.
‘The danger is that enthusiasm for domestic renovations hits the obstacle of prohibitive costs and delays, thus stopping the current boom in its tracks.
‘This could leave Wickes exposed in a competitive market and remind investors why Travis Perkins was keen to spin off the business in the first place.’
