Deutsche Bank Upgrades Wickes to Hold on Improved Trading Outlook

Deutsche Bank has upgraded U.K. home improvement retailer Wickes Group (LON:WIX) to "Hold" from a previous "Sell" rating, citing improved trading momentum and a stronger project pipeline. The bank's analyst, Benjamin Yokyong-Zoega, also raised the price target on the stock to 210 pence from 165 pence.

Rationale for the Upgrade

In a note to clients, Deutsche Bank stated that the recent positive performance reduces the downside risk to Wickes' earnings. While acknowledging cyclical headwinds such as weaker demand for big-ticket purchases and inflationary pressure on consumers, the bank anticipates Wickes will continue to gain market share in a challenging environment.

The upgrade follows a recent trading update from Wickes that showed an acceleration in sales during the third quarter. The company reported that retail like-for-like sales had shifted to mid-single-digit growth in the quarter-to-date, a significant improvement from the 0.3% decline recorded in the first half of the year.

Financial Performance and Outlook

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Deutsche Bank noted that Wickes' full-year guidance implies a roughly 20% growth in pre-tax profit in the second half of the year. This growth is expected to be supported by stronger like-for-like sales and ongoing cost-saving measures.

For the 26 weeks ending June 27, Wickes reported solid first-half results that underpin the more optimistic outlook:

• Adjusted pre-tax profit: £27.6 million, a slight increase from £27.3 million a year earlier.
• Revenue: Rose 2.1% to £865.3 million.
• Like-for-like sales: Increased by 0.7%.
• Design & Installation revenue: Grew to £225.5 million, marking a fifth consecutive quarter of growth.

According to Deutsche Bank, Wickes shares trade at a valuation of 10.8 times estimated 2026 earnings, compared to 11.4 times for its peer Kingfisher.