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Wilko achieves significant profit turnaround

The high street discounter Wilko has delivered an exceptional turnaround in profitability in its latest financial year, despite reporting a decline in overall turnover.

The company’s turnover fell 2.3% to £1.56bn for its financial year which ended 2nd February 2019, compared to £1.62bn the previous year. However, it’s the £100m profit turnover they’ve achieved which is most notable, with pre-tax profits of £34.8m, compared to a pre-tax loss of £65m the prior year. The company also reduced its debt, ending the financial year with positive cash flow of £26.9 million, an increase of £52.1 million over the previous year.

A spokesperson from Wilko said: “Cost and cash discipline has played a significant role in our improved financial position. This has been accomplished through embedding more robust financial controls and challenge across all areas of the business.”

Chief financial officer Alex Russo said “We have focused this past year on controlling margin, costs and cash, helping us to return to profitability. While the retail environment remains challenging, we are pleased to see the popularity of our own brand products continue to rise. The coming year will see us focus on continuing to improve the customer proposition and drive further operational efficiencies. We want to ensure product is at the centre of everything we do so that we can continue to free up hardworking families to be the best they can be, through offering great products at affordable prices.”

Over 50% of its turnover was generated from their Wilko own brand ranges (54.7%), increasing from 52.7% in 2018 as the still privately run company, continued their transformation strategy.

Hannah Thomson, senior retail analyst at GlobalData, said: “Wilko is emerging from another turbulent year – one full of senior management changes – in which it suffered a £63.4m dip in UK sales to £1.555.7m. The retailer attributed this underwhelming performance to the challenging retail environment and last year’s 53 week comparative, but on a sales per week basis FY18/19 still underperformed with sales per week falling 2.1% compared with the previous year. However, in spite of this, Wilko has returned to profitability, delivering an increase of £99.8m in pre-tax profits, citing improvements in cost control.”

She went on to say that the retailer continued to be threatened by rival value general merchandise retailers B&M and The Range, both focusing on larger format stores. But she said that Wilko needed to focus on growing sales online to differentiate itself from B&M. “Up against tough comparatives, online sales were flat for FY18/19, but as online penetration increases across al retail sectors, Wilko will face the same challenge as many on the high street – that delivering growth online will be vital to offset declining store sales.”

During the period the company opened eight stores and closed seven, bringing its overall estate to 416.

Source: Insight DIY Team & Wilkinson Hardware Accounts

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