Deutsche Bank reiterated its 'sell' recommendation on Travis Perkins (LSE:TPK) and maintained its 530p price target.
In a note titled “The store next door”, analyst Ben Wild examined the continued expansion of the fixed price trade counter model in the United Kingdom.
The model was pioneered by Screwfix and subsequently mirrored by Toolstation, which is owned by Travis Perkins.
The fixed price trade counter format offers transparent pricing, rapid click and collect, and small, high-density branches focused on trade customers.
Deutsche found that Toolstation’s branch network was highly co-located with Screwfix.
Approximately 40% of Toolstation locations shared an identical full postcode with a Screwfix site.
The bank further estimated that around 90% of Toolstation branches had a corresponding Screwfix within a five-minute drive time radius.
Deutsche argued that such proximity materially intensified competitive pressure. The bank noted that Toolstation’s progress against Screwfix had stalled in recent years.
It highlighted that Toolstation’s branch economics materially underperformed its larger rival. Revenue per branch was more than 50% below that achieved by Screwfix, according to Deutsche Bank’s analysis.
The bank inferred that this performance gap limited Toolstation’s ability to absorb price competition or step up investment.
As a result, Deutsche judged Toolstation to be vulnerable to lower Screwfix pricing and other investment initiatives designed to capture volume share.
In late morning trading, the shares were changing hands for 693.5p, down 0.6%.