Nick Bubb’s verdict: Wickes - Not doing it for me?

A trade-focused DIY retailer such as Wickes should be cashing in on the “Do It For Me” boom, so what lies behind the weak third quarter?

Given the pick-up in housing and construction activity, the City was expecting a good third-quarter sales report yesterday from the builder’s merchanting group Travis Perkins and the overall 6.3% like-for-like sales growth (for the 13 weeks to 29 September) was certainly pleasing.

The surprise was that Travis Perkins’ recent progress has been very skewed towards the core ‘trade’ operations: the ‘general merchanting’ and ‘specialist merchanting’ businesses both saw like-for-like sales growth of 10%/11%, whilst the plumbing and heating division was up 5% like-for-like.

However, Wickes appears to be struggling, as overall “consumer” division like-for-like sales were only flat in the period and Wickes is by far the biggest business in this division (which includes the Tile Giant chain and the Screwfix-clone Toolstation).

Now, ‘if in doubt, blame the weather’ is a well-tried motto in retailing and Travis Perkins would have us believe that “both Wickes and Tile Giant received little benefit from the warmer summer weather, given their limited range in outdoor categories”.

Wickes has always been more hard DIY focused and as consumers in search of paddling pools, garden chairs or summer bedding plants would probably try Homebase and B&Q first, if they had the choice, this explanation makes a bit of sense. After all, we have heard both Homebase and B&Q trumpet their success, to varying degrees, with sales of seasonal ranges in the unaccustomed warmth of July and August.

The problem is that the weather shouldn’t have stopped Wickes from doing well in September and before the third-quarter period unfolded it had been trading perfectly well: the spring was poor, as it was for Homebase and B&Q, but a strong May and June saw Wickes’ sales jump up by 8.6% like for like.

Quarter-three therefore saw an abrupt reversal of momentum for Wickes, which prompts some questions about its market positioning. It is still a well-run and usefully profitable business, but it may be starting to get squeezed by the polarisation of the trade market, between the growth of the online specialists supplying ‘white van man’ (like Wickes’ fast-growing sister business Toolstation and Kingfisher’s very successful Screwfix operation) and the core builder’s merchant market.

As the leading supplier of building materials in the UK, Travis Perkins as a whole is very well placed to take advantage of the recovery in construction activity (and remains on track to meet its full-year earnings target) , but it will be interesting to see how Wickes performs in the final quarter of the year and how Travis Perkins sees its outlook when it presents group strategy to the City on December 3.

Another well-tried motto in retailing is “if in doubt, change the management” and, ahead of this week’s new product development show in Lille, Kingfisher announced some big moves in the B&Q management team last week, with the B&Q MD Martyn Phillips leaving the building and the former group FD Kevin O’Byrne moving into his seat.

Taking out a layer of management and giving Kevin O’Byrne direct control of B&Q makes sense, given the underperformance seen at B&Q, with chief executive Ian Cheshire tasking the new team to improve B&Q’s sales figures. But it was also interesting to see Steve Willett, the founder of Screwfix, joining the B&Q Board, along with his colleague Dave Lowther (as logistics and supply chain director).

B&Q has to make its business much more trade focused, as the pre-election recovery in the housing market and housebuilding is likely to benefit the Do It For Me trade operators rather than the traditional DIY retailers, so the Screwfix-isation of its management team may be the answer.

Time will tell whether Travis Perkins will decide that Toolstation-isation of the Wickes management team will help to pep up its performance.