Wilcon Depot, Inc., the country’s leading home improvement and finishing construction supplies retailer, reported a 2.1 percent dip in net income year-on-year to P1.82 billion for the first half of 2023. In a disclosure to the Philippine Stock Exchange, the firm said total sales growth slowed down while operating expenses growth accelerated, partly offset by gross profit margin expansion and increase in operations-related other income. Wilcon President and CEO Lorraine Belo-Cincochan
“We had a slower growth in the second quarter mainly due to the decline in foot traffic in our old stores,” said Wilcon President and CEO Lorraine Belo-Cincochan. She noted that, “We have a high base since there was pent up demand for the same period last year as we just came out of the Omicron surge plus there was a slowdown in private construction especially in April with its consecutive long weekends.” “Historically, months with longer holiday stretches were periods with relatively lower sales since construction projects are usually also paused to save on labor cost or homeowners go on holiday themselves,” Belo-Cincochan explained. She added that, “While our sales still grew modestly in the second quarter, this was not enough to cover the increases in our fixed costs, which comprises the bulk of our opex.” Despite a seeming softening of demand this year in the home improvement sector, Belo-Cincochan said Wilcon remains committed to its expansion plan. “We are still pursuing our expansion plans at our current pace. We want to be ready and conveniently within reach by our customers when demand picks up. “We have opened four new stores so far and tomorrow we are opening another depot. We still have seven ongoing construction projects, not including several that are in the planning or permitting stage, which are set to be opened next year,” she said. Net sales for the half amounted to P17.15 billion, 7.6 percent higher year-on-year, mainly driven by the contribution of new stores as comparable sales growth was flattish at -0.2 percent for the half. Comparable ticket size expanded by 4.3 percent offset by the drop in transaction count by 4.3 percent. Four new stores were added during the half while two bottom-dwelling, smaller format branches were closed, ending the half with 85 stores. The depot format accounted for 97 percent of net sales, the home essentials format 2 percent and the remaining 1 percent by project sales. Gross profit increased by 9.9 percent to total P6.77 billion driven mainly by the expansion in gross profit margin from 38.6 percent to 39.5 percent year-on-year. In-house and exclusive brands’ margin increased enough to overturn the impact of the slight drop in contribution to net sales from 51.1 percent to 50.7 percent. Operating expenses including lease-related interest expense increased 21.4 percent year-on- year to close at P4.677 billion. Expansion-related expenses primarily drove the increase particularly depreciation and amortization and manpower expenses. Eleven stores were opened from the third quarter of last year to end-June this year. Other income jumped 93.7 percent to close at P313 million for the half traced mainly to the rebate received from a trade supplier for a promotional activity in the first quarter plus the increase in the usual rent and other income from suppliers and delivery fees from customers. Net sales for the second quarter amounted to P8.62 billion, up 4.0 percent year-on-year traced mainly to the contribution of below one-year stores. In view of the decline in comparable sales and the increase in operating expenses, net income for the quarter slid by 14.9 percent to P856 million year-on-year.