Home improvement retailer Wickes’ (WIX) 2021 results were strong on all fronts and while consumers face a cost of living crisis, the DIY retailer is confident it can continue to outperform the market and is accelerating investment in new store openings and refits to drive growth.
Spun out of Travis Perkins (TPK) in April of last year, shares in Wickes rallied 6.3% to 183.4p as profits topped estimates and it issued a confident outlook, though Liberum Capital argues the retailer remains ‘ridiculously too cheap’.
The broker’s 450p price target implies 245% upside.
SOLID SHOWING
Despite grappling with supply chain disruption, Wickes grew adjusted pre-tax profits by 72% to a better than expected £85 million in the year to 1 January 2022.
Turnover ticked up 14% to £1.53 billion as consumers splashed out on home renovations and refurbishments.
Wickes grew at over twice the rate of the market thanks to strong digital sales, a strengthened trade position and a resilient showing from its DIFM (Do-it-for-me) business despite Covid disruption.
ACCELERATING INVESTMENT
‘Our strategy is delivering strong growth and return on investment,’ insisted CEO David Wood. ‘The results we are seeing, plus these strong returns, give us confidence to accelerate our investments to drive further growth.
‘Looking ahead, we expect to continue outperforming the market and are well-placed to capitalise on the ongoing requirement for home improvement - namely an ageing housing stock, favourable consumer trends, and the increased focus on insulating and retrofitting homes.’
Wood continued: ‘While we recognise the pressure that consumers will be facing in 2022, we have the right model, a strong pipeline and order book, and remain confident of making further progress in the current year driven by a material increase in DIFM revenues.’
Wickes reported flat trading in the first 11 weeks of 2022 as it laps tough prior year comparatives, although the DIFM business has had a very strong start to the year.
The retailer also declared final dividend of 8.8p per share, taking the payout ratio to 40% of adjusted pre-tax profits, ahead of the 30% guidance given at the time of its demerger from Travis Perkins.
Wickes also flagged a preference to return any surplus cash it generates in future to shareholders via share buybacks or special dividends.
