Builders merchant group Travis Perkins is to close around 165 branches across its business as a response to the continued challenges of the Covid-19 pandemic, consequent lockdown and likely UK recession.
The group issued a trading update and liquidity update this morning (June 15) to say that the actions, which will affect around 8% of the Group’s network, are “regrettable but necessary… to preserve the future competitiveness of the business”. A number of roles in the distribution, administrative and sales functions will also be affected. In total, the Group expects to reduce the number of colleagues by around 2,500 or approximately 9% of the workforce.
Branch closures will affect the Merchant businesses, in particular the Travis Perkins General Merchant, focusing on small branches where it is either difficult to implement safe distancing practices, or where marginal profitability will be eroded in a reduced volume environment.
The statement also said that, over the last six weeks, the Group has continued to open more of its branches under the safe, social-distancing working practices we have developed in conjunction with customers, suppliers and construction industry bodies, as well as the UK Government.
Group volumes in May were around 60% of prior year with an improving trend throughout the month. The Group’s weekly volume run rate is now around 85-90% of prior year with particular strength in Wickes’ core DIY ranges and in Toolstation, with both businesses demonstrating improving like-for-like growth versus 2019, with performance underpinned by their strong digital capabilities.
Across the Merchanting and Plumbing & Heating businesses, volumes are now around 80% of prior year with more marked differences between the businesses depending on the customer category mix and also with some regional variations. The General Merchanting business is operating well, whereas trading in Plumbing & Heating is recovering more slowly as a greater proportion of plumbing work requires tradesmen to work in people’s homes.
However, while there has been a significant recovery in trading volumes in recent weeks, it is evident that the UK is facing a recession and this will have a corresponding impact on the demand for building materials during 2020 and 2021.
Due to the ongoing uncertainty caused by the COVID-19 pandemic, the Group has decided to publish its interim results in early September.
Nick Roberts, Chief Executive, said: “The COVID pandemic has created significant challenges across our Group and I have been hugely encouraged by the flexibility of our colleagues to adapt our business models successfully and at pace, which has enabled us to maintain safe working practices whilst continuing to provide an effective service to our customers.
“Whilst we have experienced improving trends more recently, we do not expect a return to pre-COVID trading conditions for some time and consequently we have had to take the very difficult decision to begin consultations on the closure of selected branches and to reduce our workforce to ensure we can protect the Group as a whole. This is in no way a reflection on those employees impacted and we will do everything we can to support them during this process.
“The Group has a robust balance sheet, strong liquidity position and I am confident that these proposed changes will enable us to trade successfully through this period of uncertainty with a cost base that better reflects the environment we are operating in.”