Travis Perkins shares were the biggest FTSE 350 faller on Friday after the company said they were feeling the pressure of higher interest rates and inflation.
On Wednesday, the UK Investor Magazine included Travis Perkins in our premium article detailing FTSE 350 stocks most at risk of higher interest rates.
Today, these risks were confirmed as Travis Perkins said they were experiencing difficulties as a direct result of higher interest rates and issued a profit warning.
Travis Perkins said in a statement:
“Volumes in both the new build housing and private domestic RMI markets continue to be impacted by higher interest rates and weaker consumer confidence driven by persistent, higher than anticipated consumer price inflation.”
AJ Bell’s Russ Mould explains Travis Perkins’ challenges in their new home building and consumer-facing business.
“John Carter, when he was boss of Travis Perkins, used to say the health of the housing market was far less important to the business than repair, maintenance and improvement (RMI) demand for existing homeowners,” Russ Mould said.
“His argument was that you don’t need a sale or a purchase of a property to spend money with the builders’ merchant, and that RMI demand was less governed by the direction of interest rates.
“He also said new build homes were more of a sideshow for Travis Perkins than existing housing stock, calling work for the big housebuilders ‘padding’ and not that profitable.
“While Carter is no longer chief executive, it’s clear from Travis Perkins’ latest trading update that his argument would not stand up today.
“In its profit warning, the company cited weaker volumes in new build housing and private domestic RMI markets being affected by higher interest rates, together with weaker consumer confidence amid high levels of inflation.”
