Debt free17 Jan 2022 08:04
I was just looking to remake a serious point on Wickes published debt - there’s very very little in the layman’s sense, something I think is not well-understood, and then you drag me off into inflation. I guess as you refer to the model ( giving rise to the staff ) that the question you pose boils down in practice to whether there is any particular reason to believe Wickes is disproportionately affected by iinflation when compared to its UK competitors. I cannot think of such a reason.
Future inflation, GDP, employment market? Above my pay grade - even the experts can be out.
But I think you refer more to wage inflation. Seems to me they are likely to be no more disadvantaged by that prospect than their competitors - it is an issue for the construction sector generally, more so on skilled tradespeople than generic labourers or store assistants, so, you know, what of the builders’ business models? And I read Kingfisher has 80000 across its businesses.
And on skilled workers, under Do It For Me, Wickes increased it’s numbers of prior 2yrs. experienced fitters by 300 I think, during last year. It’s still advertising for more - there’s a backlog of installations before cash can be credited - and now for more flooring fitters/tilers after providing that service since October last. These are “Wickes approved” rather than on the payroll. Wickes will have to pay the rate, but that will be/have been incorporated into the costings - inevitably the end consumer will pick up much, if not all, of the tab - in the same way as product price inflation due to the said shortages - and PBT has been on the up.
The housing market is of course a driver. For everyone buying a new home there is very probably an existing house move chain, and prospects that the new owners of perhaps several properties will want to upgrade in due course - there’s usually something not quite right. And for those who do not move, perhaps it’s about time we did this or that, new bathroom or something.
I can’t see there’s anything wrong with the e-commerce backed balanced business model, whatever the environment - covering smaller local trades who know what they want, DIY’ers who have at least half an idea, and those looking for a complete bathroom or kitchen fit out and what might go with it - from a smaller curated range of products in right-sized stores, enabling stockturn to fall roughly in line with the payment cycle, so the business is working capital neutral.
At the moment, the top of my own agenda is that this is a dividend paying, debt free, cash-generating company, and the consensus view that it is substantially undervalued.
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