DIY retailer Wickes (WIX) reported solid third quarter results amid continued buoyant conditions in the repair, maintenance and improvement market.

However, the shares cheapened 2% to 221.4p as Wickes reported a moderation in sales growth and maintained rather than upgraded its full year profit guidance.

LAPPING TOUGH COMPARATIVES

Spun out of Travis Perkins (TPK) in April of this year, Wickes’ total like-for-like sales fell 1.6% in the quarter to 25 September as the retailer lapped a tough prior year comparative.

Nevertheless, like-for-like sales remained ‘strongly ahead’ on a two-year view, with 16.3% growth attributed by Wickes to its ‘digital leadership and operational strengths’.

Wickes benefited from a strong local trade performance, with home renovations continuing to drive robust order books for trade customers and good supply meaning that product availability has remained strong, and also reported an improving two-year trend in Do-It-For-Me sales.

CEO David Wood commented: ‘This resilient performance has been underpinned by our digitally-led and service-enabled customer proposition, while our agile business model has enabled us to continue to navigate inflationary pressures and raw material constraints well.’

Wood insisted his charge is ‘well-placed within a large and growing home improvement market’ enjoying a number of tailwinds.

Housing transactions are at a post financial crisis high, mortgage approvals are at a multi-year high, households are flush with cash following the Covid lockdowns, while the adoption of more flexible lifestyles with more working from home is driving increased spending on home improvement projects.

THE LIBERUM VIEW

Liberum Capital regards Wickes’ third quarter performance as ‘a strong result in the current environment’, one that also comes ‘after two rounds of upgrades since the de-merger in late April and still leaves some scope for a beat to full year numbers’.

The broker pointed out Wickes’ lower overall quarterly sales growth rate is ‘what we were expecting given the very strong prior year comparative, it is what management had already highlighted in the first half results and, on a two-year view, growth remains in strong double-digit territory at 16.3%.’

Forecasting full year adjusted pre-tax profit of £73.9 million following two sets of upgrades, Liberum continues to see Wickes as ‘one of the best ways to play the UK RMI trade’ and argues the shares ‘remain far too cheap for the high-quality growth, profit momentum and strong cash generation on offer’.

READ MORE ON WICKES HERE

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Issue Date: 27 Oct 2021