WILCON Depot, Inc.’s shares slipped last week after weak second-quarter earnings and overall gloomy market sentiment.
Data from the Philippine Stock Exchange (PSE) showed a total of P266.41 million worth of 11.27 million shares were traded from July 24-28, making it the 16th most actively traded stock last week.
Shares in the listed retailer of home improvement and construction supply fell by 6.1% week on week to P23.00 per share on Friday from its P24.50 finish on July 21. Since the start of the year, the stock has dropped by 22%.
“The main driving force behind Wilcon’s stock price action was the market’s expectation on its second quarter [earnings report]. However, it seems like the public was underwhelmed with the actual second quarter figures of Wilcon,” said Regina Capital Corp. Head of Sales Luis A. Limlingan in an e-mail.
In the second quarter, Wilcon posted a net income of P855.77 million, a decline of 15.4% from the P1.01 billion recorded in the same period last year.
Net sales went up by 4% to P8.62 billion from the P8.29 billion seen in the same period a year ago.
In a press release on Thursday, Wilcon President and Chief Executive Officer Lorraine Belo-Cincochan said the company “had a slower growth in the second quarter mainly due to the decline in foot traffic in our old stores.”
Ms. Belo-Cincochan also said that while sales grew modestly in the second quarter, it was not enough to make up for the increases in the company’s fixed costs.
For the period, the company’s operating expenses, which included lease-related interest expenses, increased by 20.3% to P2.37 billion from P1.97 billion mainly due to expansion activities.
Globalinks Securities and Stocks, Inc. Head of Sales Trading Toby Allan C. Arce said in a Viber message that overall weak market sentiment dragged down the company’s share price.
“The housing market in the Philippines has also been slowing down in recent months, due to factors such as rising interest rates and elevated inflation,” Mr. Arce said, adding that this could have also weighed on Wilcon’s sales as the company sells a wide range of home improvement and construction products.
Headline inflation eased to 5.4% in June, still at the low end of the 5.3-6.1% forecast range of the Bangko Sentral ng Pilipinas that month.
In June, the Monetary Board paused its rate hikes for a second meeting, maintaining the key policy rate at a 16-year high of 6.25%. From May 2022 to March 2023, the central bank raised borrowing costs by a total of 425 basis points to temper inflation.
Despite these difficulties, Mr. Limlingan said that the company’s expansion plans would likely boost the market appetite for Wilcon once the demand for home improvement products increase.
The company has seven ongoing construction projects that are set to open next year. During the first half of the year, four new stores were added, bringing the total to 85 branches.
Mr. Arce expects the company’s net income to reach P926 million in the third quarter.
“The company has a strong track record and is well-positioned for future growth. If the overall economic conditions remain favorable, the company could achieve its earnings growth targets,” Mr. Arce said.
Mr. Limlingan placed Wilcon’s support and resistance levels at P21.80 and P25.40, respectively.
“For [this] week, support may be placed at P22.35, while resistance is estimated at P24.15,” Mr. Arce said. — Mariedel Irish U. Catilogo
