Parent company Wolseley reveals trading conditions were "particularly challenging" for the bathroom retailer.
The bathroom specialist, which Wolseley is in the process of trying to sell, posted a 9% sales decline for the first half ended January 31. Wolseley described trading conditions as "particularly challenging" for the retail business during the six-month period.

Private equity firm Electra Partners is said to have spent weeks in discussions with Wolseley to buy Bathstore for between £80m and £90m. However, reports suggest the firm is now on the verge of abandoning the deal or lowering its price, on the back of the retailer's poor trading performance.

Wolseley reported sales of £1,221m in H1 for its UK operations, which includes Bathstore as well as trade outlets Build Center and Plumb Center. The figure represents a 1% decline on the previous year, impacted by the disposal of underperforming businesses, including Brandon Hire, which was sold to Rutland Partners last August. However, the disposal of these businesses positively contributed £6m to the group's UK trading profit, which was up around 54% to £51m.

Like-for-like sales in the UK were up 6%, boosted, said the company, by a 3% price inflation and continued gradual recovery in the RMI sector.

Plumb and Parts Center both performed well and, despite intense competition in their markets, were able to increase gross margins and gain market share.

Build Center continued to improve its trading performance in H1, with further reductions in its cost base. The builders merchant slightly underperformed the market, said the group, as Wolseley focused on protecting gross margins, which were ahead of the previous year.

Wolseley chief executive Ian Meakins said: "This was a good first half performance, driven principally by resilient RMI markets and the considerable attention that we have paid to improving customer service, protecting gross margins and controlling costs. Construction markets have now broadly stabilised in most of our geographies."

While growth trends in the first half were encouraging, with market conditions stronger than expected, Wolseley remains cautious about the potential impact of VAT increases and prospective cuts in public sector spending.

"The overall macro-economic environment in several regions continues to be fragile and pricing competition remains intense," explained Mr Meakin. "The impact of recent VAT increases and government spending cuts leaves the outlook in the UK more uncertain. We continue to maintain our emphasis on protecting market share and gross margins while keeping a tight control on the cost base to maximise operating leverage."

Meanwhile, sales across the group, which also includes operations in the United States, Canada and France, increased 5% on a like-for-like basis. Trading profit was up 64% to £275m, resulting in the reinstatement of a dividend, which totalled 15p per share.

Mr Meakin concluded: "The Group expects to continue to grow in the second half of the year, though the comparatives will now be much more demanding. The reinstatement of the dividend reflects the strength of our balance sheet and our confidence in the future trading prospects of the Group."