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Wilcon Depot shares inch higher despite lackluster earnings

SHARES in Wilcon Depot, Inc. went up last week despite its weak third-quarter financial performance due to softer demand for home improvement and construction.

Data from the Philippine Stock Exchange (PSE) showed a total of 6.56 million Wilcon shares worth P130.14 million were traded on Oct. 31 and Nov. 3, making it the 16th most actively traded stock during the two-day trading week.

The market was closed for public holidays on Oct. 30, Nov. 1, and Nov. 2.

Shares of the home improvement and construction supply retailer rose 3% week on week to end at P20.40 apiece on Friday from its P19.80 closing price on Oct. 27.

However, for the year so far, Wilcon’s stock is down by 30.8%.

Wilcon earlier reported that its net income reached P907.98 million in the third quarter, down by 17.8% from P1.10 billion in the same period last year.

For the first nine months, the company’s earnings declined by 7.9% year on year to P2.73 billion from P2.96 billion.

Meanwhile, gross revenues for the quarter inched up by 0.5% to P3.48 billion. For the first nine months, revenues increased by 6.6% to P10.25 billion from P9.62 billion in 2022.

Analysts attributed the “lackluster” earnings of Wilcon to its higher operating expenses compared to its sales in the third quarter.

The jump in operating expenses was mainly due to expansion-related expenses as Wilcon opened eight stores since the fourth quarter of 2022. Lance U. Soledad, research associate at China Bank Securities Corp., said in an e-mail.

Lower advertising and promotions from Wilcon’s suppliers also led to lower rent and other income, I.B Gimenez Securities, Inc. Research Head Joylin F. Telagen said in an e-mail.

Mr. Soledad said the market saw a “substantial selloff” before Wilcon’s reported its third-quarter earnings as investors braced for weak corporate financial results.

Despite Wilcon’s slightly better performance last week, it remained on a downtrend due to the shortened trading period, Ms. Telagen said.

“If there is surprise news that may improve the company’s performance and align to investors’ objectives, then trade,” she said.

“Due to disappointed earnings and trading within the downtrend area, I think it’s better to set an alert. If it exits the downtrend channel with an attractive risk-reward ratio, then trade,” Ms. Telagen added.

She placed Wilcon’s support and resistance levels at P19 and P22.25, respectively.

Meanwhile, China Bank Securities’ Mr. Soledad placed the stock’s support and resistance at P19 and P21.90, respectively.

“We think that the stock price recovery for [Wilcon] may be protracted for so long as… it continues to see elevated costs — especially as expansion-related expenses are likely to continue weighing on profitability — as it targets to continue growing its store network despite prevailing soft demand conditions,” he said. — B.T.M. Gadon

Neil Banzuelo

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