Wickes Share Discussion Threads

[essentialinvestor] 03/9/2022 09:24

Yes they owned Wicks back then. From memory Wicks traded relatively well through the
GFC and their other divisions took a larger hit. It was a considerably smaller
group back then.

KGF also stayed highly profitable through the GFC, I don't remember a KGF equity raise
being needed, TPK raised cash through an RI in 2009 - would need to double check that
to be 100% sure.

Kingfisher earnings did fall from the 2007 peak, as you would probably expect,
I cant remember the %'s.

[elongate] 03/9/2022 09:04

And Wix? Previous cycles?

[essentialinvestor] 03/9/2022 08:54

You can read back the Travis Perkins results from previous cycles and see
how the above view holds up.

[elongate] 03/9/2022 08:13

It downgrades house builders. We know there is a downturn. Bad for business, yes. Yet Wix does not build or sell houses. Wix has already reflected on its own position in it’s trading statement dated 26th. July, when downgrading it’s own expectations. ( as have the published analysts, who continue to rate it a buy - not a hold or reduce as mentioned in the link )

“Whilst comparatives for Core sales ease in the second half, trading in recent weeks in DIY and a softer outlook for the DIFM market suggest customers are reacting to the uncertain macroeconomic backdrop as we enter the second half of our financial year. Given this backdrop we currently expect full year adjusted PBT to be in the range of £72-82m.” ( down by 15% - 20%, not dissimilar to the link )

and

“Wickes has delivered another strong performance, as the business continues to provide the best value, choice and availability for customers. Our TradePro scheme is expanding with great momentum as tradespeople turn to Wickes for value during a period in which consumers are becoming more price conscious. It is encouraging to see continued outperformance in our Core market share despite recent signs of softening in the DIY market. We continue to do a great job engaging DIFM customers as they take a little more time to consider their purchases.”
 
“Our investment for growth progressed in the period with five store refits completed in the first half which continue to drive strong returns. We remain watchful of the macroeconomic backdrop and are managing the business appropriately to navigate these external pressures. We are confident that our uniquely balanced business model and great value offer for customers will enable us to continue to deliver for the benefit of all our stakeholders.”

Wix is coming off a highly productive COVID-related period into a downturn, and everything will soften from there, especially from those highs. If it can actually achieve it’s current guidance it will be creditable. We will see about that as time passes, but I think it’s raison d’etre, home improvement, remains in the context described in the paragraph in the FY results

25th. March 2022
“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……….”
Wix does not sell to new house builders. That will be closer to Travis Perkins bag, whence Wix came. Wix sells to local trades. Including jobbing builders.
It is a home improvement business, not directly house builder connected, who usually fare badly in economic downturns.

A thriving housing market would be beneficial. Wix has not recently mentioned that market, perhaps because they could see those particular clouds on the horizon.

It is possible for those who want to be so to be gloomier elsewhere. Somebody previously said that “Death by DIY” posts are overdone. Witty and apt.

I leave you with lifts. There is a more positive case to be made under the circumstances than that mostly reflected on this board. Whether acceptable or not, they may assist in differentiating between new builders and home improvement.

Home Maintenance Stores (But Not Builders)
Many people will choose a do-it-yourself home renovation or upgrade rather than consider selling and moving during a recession. Depending on credit conditions, borrowing to buy a new home is often not an option for most people during a recession anyway.

Do It Yourself
When economic times are tough, DIY activities of all sorts increase. This effect may be even more pronounced during periods of imposed social distancing and forced business closures.
Companies in the business of providing tools and materials for home improvement, maintenance,  and repair projects are likely to see a stable or even increasing demand during a recession, as will many appliance repair service people.

New home builders, though, do not get in on the action. They are among the worst hit as bank lending gets tighter and home sales slump.

DIY And Home Maintenance
During a recession, many people choose DIY as an alternative to paying decorators or ‘handymen̵7;. They also tend to choose making improvements to their existing home rather than moving to a new house. This is because the option to save money is much more appealing than borrowing to buy a new home. Businesses that sell/provide tools and materials for home improvement are very likely to see an increase in product demand during a recession.

[elongate] 02/9/2022 12:22

That’s a fact, EI - but also trite. And we’re awaiting results on 16th.

[elongate] 02/9/2022 12:20

I don’t regard store refits as expansion by the way, it’s in the context of more sales per square foot, better customer experience, market share, whatever the economic environment. Management have been proved right with that.

[essentialinvestor] 02/9/2022 12:19

Well if management knows best.. I don't see any recent BOD buying at these bargain
levels.

[nickrl] 02/9/2022 11:59

ElonGate management should no best but theres plenty of casualties to demonstrate its not a guarantee. This share price slide started after their last trading update and you have to give them credit for openness. Whats missing though is BoDs loading up at this cheap price.

[elongate] 02/9/2022 11:24

Management will know best - they can reasonably be expected to know more than the vast majority on these boards, certainly in a well-established company like Wix. As you pointed out, Wix has weathered storms, and from my reading is becoming increasingly focused as a stand-alone.
As you realise, we shall get some answers to points raised on 16th.

[creditcrunchies] 02/9/2022 11:14

Put it this way I'm not a ramping this I have no idea how low the market is going to push this lower. I just look at value, quality of the business right now then accumulate into my SIPP. I'm certainly not trading this stock it's a medium term investment. I could be wrong in my to thinking. I don't think store expansion with the current economic environment is a good idea, expansion in recessions are a bad idea.

[elongate] 02/9/2022 10:58

I expect the company to continue with refits - they have been paying for themselves over a four year period. It is good investment.
I accept the environment has changed, and home improvement companies are in the same boat.
Some will do better than others though, and I suggest that the Wix operating model will allow it to thrive, very relatively speaking, in a downturn.

[essentialinvestor] 02/9/2022 10:53

Ok, fair enough, just trying to give some longer term context.

This sector is a cracking recovery play, if you can get timing anywhere near
right - but we are still early in this downturn.

[creditcrunchies] 02/9/2022 10:49

Ok split up Kingfisher because B&Q gets hit it has too much stock, massive stores, nice to have discretionary consumer spending items. They own Screwfix how do they cope? That's essential maintenance that's WIX core market. The kitchens and bathrooms are new business I agree those will get hit as property slumps. The only part that concerns me about WIX are the cost of store refits and store expansion that needs to be put on hold

[elongate] 02/9/2022 10:45

I have little doubt that on 16th.Wix will tell us that whilst being mindful……;.they are confident…R30;..
Market share has been increasing — it is coming from elsewhere.

[essentialinvestor] 02/9/2022 10:39

CC, take a look at a longer term chart of KGF, gives at least some idea of
how the sector is treated during recessions - It's not shaping up to be any
different this time - there is the outside chance of an opportunistic bid.

[creditcrunchies] 02/9/2022 10:37

I must admit I wouldn't think Wickes for a new kitchen but I have seen them in the store. Saying that when I'm viewing houses with my wife we do look to see if the kitchen and bathroom needs upgrading, if it does our offer price reflects that as we've already got our agreed budget we can afford. I'm sure everybody else does the same. Ok so after those orders have gone through from 2 years of post COVID house sales boom we will have a flat property market where only house stock on sale will be distressed sellers. So by end of 2023 the orders for kitchens and bathrooms will be stagnant. You'd have to look at the percentage of sales are kitchens compared to essential maintenance for Wickes that's what you'd knock off the revenue figures then see how they cope with margins. That's an unknown. So far the market has wiped off -45% of the market value of the company in 12 months. They could easily be a takeover target because this company has weathered many recessions whilst the DIY market has consolidated to just a handful of players left in the market.

[elongate] 02/9/2022 10:21

Wickes operates a progressive dividend policy, so I doubt it will be ‘slashed and burned’ at any stage. However, I do not expect dividend to be enhanced as it was last time around.

[nickrl] 02/9/2022 10:14

CreditCrunchies margins are under huge pressure both from reduced demand and the ability to source products at sensible prices. However, where i see WIX is going to lose ground rapidly is the new kitchen side where business has been looking good due to backlog of orders. So that divi cover will rapidly be eroded but i suspect they will act like most companies and hold the dividend level for too long then have to slash and burn it.

[creditcrunchies] 02/9/2022 10:05

The market hits everything with a hammer they look at sectors then batter every stock in that sector. The analysts don't have the intelligence to sift through the individual stocks. I don't know if I'm stating the obvious here but when you buy a house you put in an offer based on what work needs to be done. You set a budget on essential works it's already factored. The nice to have alterations are put to one side for the medium term. Those are the areas that get hit in a recession.

[philanderer] 02/9/2022 09:31

Housebuilders and related been hit this morning.

[creditcrunchies] 01/9/2022 13:47

These have got a yield of 9% now with a healthy 2.5 times cover. Makes you wonder if they've gone a bit too far selling at this level

[essentialinvestor] 31/8/2022 14:18

KGF update in about 3 weeks, FY guidance reduction a near certainty.
Best guess, baring corporate action, is well under £2.

Sector earnings odds on to crater in 2023.

As price action is ahead of events, sector share price lows likely while fundamentals
continue to weaken.

[elongate] 31/8/2022 09:57

I have always thought Homebase continues to be a possible take over proposition. But I also think it’s time to be meaningfully bought out might have come by now, if that was the case.

[diku] 31/8/2022 09:09

Post 287...have to agree with Homebase comment...they are also expensive...they are just there as a convenient store just ploding along...for nearby customers



By the way whilst im not favourable about their current outlook when i was DIYer in my youth always preferred them over B&Q and the even more useless Homebase.