The DIY chain Wickes has said its energy costs could rise by £7.5m next year – a 75% increase – and warned of growing uncertainty regarding consumer confidence.
The home improvement retailer said that total sales grew by 2.6% in the third quarter, strengthening in September after wilting during the heatwaves in July and August.
The company said the “stabilisation” in sales – which were flat at its core DIY business but grew 12.2% across its “do it for me” home installation service – meant that it expects to hit its full-year adjusted profits target of £72m-£82m.
However, the company said orders for work to be done were down year on year in the third quarter because customers were “taking longer to commit to big-ticket projects”.
Victoria Scholar, the head of investment at Interactive Investor, said: “The post-pandemic DIY boom is fading, and inflation is rising, putting downward pressure on demand and upward pressure on costs, squeezing the retail business during the cost of living crisis and ahead of a possible recession.”
Wickes said: “Uncertainties remain regarding consumer confidence and operating cost inflation.”
The company warned of an increase in its operating costs specifically in relation to energy. Wickes said its energy contract ends in March and if costs remain at the current price cap for businesses, its bill will be £7.5m more in 2023 than this year. The company estimates that its energy bill for this year will be about £10m.
The company said a fall in the cost of timber has helped moderate the rate of retail price inflation since the first half of the year.
“Wickes has been managing inflation by increasing prices, which has helped to boost revenues in the third quarter,” Scholar said. “However, this may not necessarily translate into a strong bottom-line performance given the pressures from soaring energy bills that look set to continue to dampen profitability.”
Wickes said local trade sales have performed strongly, with TradePro, its discount scheme available to tradespeople, continuing to increase its membership by 10,000 a month to 720,000 at the end of September.
Last month, Wickes reported record revenues of £822m for the half-year to 2 July, as shoppers look to insulate their homes to alleviate soaring energy bills.
“While we are watchful of external headwinds, we are continuing to focus on our growth levers and on maintaining rigorous control of our costs,” said David Wood, the chief executive of Wickes.
