If you thought retailers were prone to talking about the weather when explaining fluctuations in performance, wait until you meet a builder’s merchant.
First, the cold snap known as the Beast from the East turned homeowners off DIY. Then a warm start to the summer sent families back out in search of laminate flooring and garden sheds.
Travis Perkins is more affected than most of its peers by the state of the economy — and the weather. It has no overseas business to offset performance when cash-poor Brits are feeling the cold.
Investors will hope for some clarity when the FTSE 250 company posts half-year results on Tuesday.
Recent reports from kitchens supplier Howdens Joinery may provide some insight into what to expect. Howdens said sales growth had slowed as homeowners spent less on big-ticket items.
However, rivals’ troubles could also give Travis Perkins a boost. Hilco Capital, which took control of the DIY chain Homebase after previous owner Wesfarmers cut its losses and retreated to Australia, has said it plans to close up to 100 stores.
Travis Perkins employs 27,000 people and supplies builders, plumbers and large construction companies with materials. It is best known for its retail brands, Wickes and Toolstation, which are aimed at homeowners and tradesmen. However, a heavy reliance on the housing market and consumer spending means trading can be volatile, and the past six months have been rocky. The share price plummeted in February after a disappointing set of results — due, said the company, to weaker consumer confidence and fewer secondary property sales, which meant people spent less on doing up their new homes. Meanwhile, even during the summer months, prime time to complete DIY tasks, Travis Perkins has to compete with holiday operators for a slice of their spare cash.
As a result of all this, the company has had to carry out cost-cutting measures, including axing a third of its head-office jobs in May.
Analysts at Barclays predict that John Carter, the chief executive, will need to cut costs further to hit financial targets. Barclays expects like-for-like sales growth of 3.8% in the second quarter, after 3% in the first three months of the year. Travis Perkins shares closed on Friday at £13.38, 39% below their peak in July 2015. About 13% are out on loan to short-sellers betting they will fall further, according to Markit.
Those speculators could well be right and it may be some time before there is any meaningful lift. Avoid.
