DIY retailer Wickes anticipates a punishing big-ticket market for years to come as consumer confidence dips and the outlook for mortgage approvals is weak.
Wickes managing director Jeremy Bird cautioned that kitchen and bathroom sales, which represent 22% of Wickes’ turnover, will get more “difficult”. He said: “We don’t think it will get better as it’s linked to housing transactions. We’ll have a very difficult market for a few years.”
Bird observed that while mortgage approvals are up this year, they are “still down on the peak market”. He said: “We’re not thinking approvals will continue to grow, and consumer confidence is starting to decline again. There is no room for optimism in the market. Our growth will not be market-driven”.
He maintained that Wickes still has “room to grow” in the kitchen and bathroom markets. “Our strategy will be to tell more people about us,” he said.
Wickes last week revealed a revenue increase of 1.7% in the six months to June 30. Like-for-likes per trading day slipped 0.5%, with core products down 3.3% and kitchens and bathrooms up 11.6%, reflecting its “effective” ad campaign and the introduction of new bathroom ranges.
However, trading has toughened. Wickes’ core like-for-like sales declined 1.5% in July, while kitchen and bathroom ordered sales fell 1.1%.
Across parent Travis Perkins’ retail division - which includes Tile Giant and Toolstation - revenue came in at £502.1m and operating profit at £26.3m in the first half.
Bird said that, although the outlook was uncertain, Wickes increased market share in the period through focus on price and service.
Operating margin came in at 5.2% - 2% lower than last year, as a result of investments in fields such as multichannel and IT, as well as the opening of its new fascia, Wickes Kitchens & Bathrooms. There are three such stores at present and plans for two more in the second half.
The 200-store retailer intends to open 100 more Wickes shops in the “next few years” according to Bird, who said it will continue to focus on a smaller format measuring 20,000 sq ft or less.
Travis Perkins reported a 24% surge in first-half adjusted pre-tax profit to £112m.