Wilcon Depot Inc. (Wilcon), the country’s leading home improvement and finishing construction supply retailer, is setting a capital expenditure budget of P2.2 billion this year—42 percent lower than the P3.8 billion allotted for 2023.
“We've always budgeted way above what we spent. For the last two years, we budgeted close to P4 billion but we haven't even exceeded P3 billion,” said Wilcon Vice President for Investor Relations May Jean Alger.
She explained that “this year, we only budgeted P2.2 billion because some of the stores that we opened, especially in the first quarter, were spill-overs from last year. So, a good portion of the capex spent there was already recognized in 2023.”
Wilcon Senior Executive Vice President and COO Rosemarie Bosch-Ong also noted that in 2024, they are building more small-format stores, which will each cost about P70 million to P80 million to put up compared to the P220 million to P230 million needed for the one depot.
“We were very much encouraged with the result of the DIWs (Do It Wilcon small format stores) that we've opened in the past several months. It's going to be like 40 percent of the number of stores that we will open, so, let’s say we plan to open 10 stores in a year. We will probably do four of the DIW concepts,” she added.
Wilcon President Lorraine Belo-Cincochan said the DIWs, which are located farther away from Metro Manila, enjoy higher gross profit margins because they are selling more of Wilcon’s in-house products and “we are estimating payback to be around two and a half years, whereas our depot is now urging or five years.”
Meanwhile, Belo-Cincochan said they expect business to improve in the second half of the year, especially since they will be coming from a lower base as the downturn in their business started in the second semester of 2023.
However, she noted that Wilcon may have to recognize a one-time loss from the damages to one of their depots that burned down earlier this year, although this will eventually be reversed once they collect on the insurance claim.
“We're hoping that at least (same-store sales growth) will be on the low side or still positive on the low side but, seeing the trend, though, it's been very erratic. We'll see some improvements in some weeks, and then some months, and then, suddenly, there will be another challenge," said Ong.
“And, of course, all the headwinds that we were experiencing in the past is still there. It has not tapered down, and we’re still seeing a not-so-favorable macro. But we're very hopeful. We're doing our best to not just achieve a positive same store sales growth, but a positive total sales growth as well,” she also said.
Alger added that “we are hoping that, in the second half, especially in the fourth quarter, we would already be seeing a reversal although not a dramatic reversal, we are not really expecting that until interest rates will start to decline.”