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Wilcon reports Q3 net income of P908-M (down 17.7% y/y)

Wilcon [WLCON 19.80, up 0.8%; 35% avgVol] [link] posted a Q3 net income of P908 million, which is 17.7% lower y/y from its Q3/22 net income of P1.1 billion. WLCON’s 9M/23 net income is P2.7 billion, which is 8% lower for the same period last year. WLCON attributes the net income downtick to higher operating expenses that could not be overcome by the company’s increases in net sales (+4.9% y/y) and gross profit (+6.6% y/y). WLCON reported benefitting considerably from new stores that were added to its network (which now stands at 87 branches), but said that it suffered a 2.1% decline in same-store sales. On a format basis, the depot format stores generated 96.5% of net sales and grew 4.1% in 9M/23 (-2.8% in same-store sales), while the smaller “Home Essentials” format stores generated 2.1% of net sales and grew 19.2% in 9M/23 (-2.2% in same-store sales). The 17% increase in operating expenses was mainly due to costs incurred as part of WLCON’s aggressive expansion program.

MB bottom-line: Shareholders are going to love seeing the income from new stores hit WLCON’s income statement, but they’re not going to love seeing same-store sales declines across all of WLCON’s store formats. Is the same-store weakness due to “soft” retail demand? WLCON’s management team seems to imply so, but they also seem confident that the strength in the builder segment will eventually pay off down the line for the company in the form of a greater pool of potential retail customers. Management’s strategy is to grow as quickly as possible into what they call a “high-potential, highly fragmented market”. They’re a year ahead of schedule to achieve their 100-store goal. Everything appears to be going according to plan. How many quarters of decline will it take before the retail demand returns?


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