Travis Perkins profits plunged 60% in 2016 as it warns that an impending housing slowdown could hit big ticket purchases.
The group operating profits slump was caused by the weak performance in its plumbing and heating division, however, Travis Perkins chief executive John Carter warned that a stagnant housing market this year could hit bathroom and kitchen sales.
He said: “The group anticipates that pressure on consumer discretionary spending from rising inflation could impact secondary housing transactions in the second half of 2017. Fewer housing transactions will have a direct impact on merchant sales volume, albeit with a lag.”
“Any significant reduction in consumer confidence may have a more pronounced impact on big-ticket purchases such as kitchens and bathrooms which make up around 10% of the group’s sales.
Wickes and Toolstation makes gains
Despite tumbling group earnings, profits rose at its consumer division driven by “strong market gains” at Wickes and Toolstation.
Adjusted operating profit for the division hit £101m over the year as like-for-like sales jumped 6.4%. Total sales rose 9.5% to £1.52bn.
Wickes continued to roll out its new store format which the retailer said offered a “simpler shopping experience”.
The new format is designed to make it quicker for trade customers to buy products while providing more inspiration for DIY customers through improved kitchen and bathroom displays and design centres.
It has refitted an additional 46 Wickes stores to the new format over 2016 and it will continue to roll it out in the year ahead.
Wickes distribution network was rationalised over the year with three sites reduced to a single warehouse in Northampton.
The retailer has also invested in keeping prices down over the year and has improved its online offer. Wickes, which achieved more than £100m in online sales last year, now offers one-hour click-and-collect, one-hour time slots for home deliveries and same-day delivery on up to 7,000 products.
Travis Perkins has also expanded its Toolstation brand and opened 36 UK stores and seven shops in the Netherlands over the year. It plans to accelerate its Netherlands expansion in 2017.
Toolstation also invested in online and launched its first web-only ranges and improved its click-and-collect service to make products available for collection within 20 minutes.