Shares in two well-known UK brands moved sharply when markets opened on Wednesday. The Travis Perkins (LSE: TPK) share price fell by 10%, trimming its 12-month gain to 38%.
Meanwhile, luxury goods retailer Mulberry Group (LSE: MUL) saw its stock climb 20%. Shares in the fashion firm have risen by more than 50% over the last year.
What’s happened — and why are shareholders seeing these big moves today?
Travis Perkins share price falls on Wickes split
Shares in FTSE 250 builders’ merchant Travis Perkins are falling today, but this isn’t due to any bad news from the company. What’s happened is that the Wickes business, owned by Travis Perkins, has now been spun out into a new company.
Travis Perkins’ shareholders will shortly have shares in Wickes credited to their share accounts. Wickes shares will trade on the London market under the symbol WIX.
Today’s share price fall reflects the loss of the value of the Wickes business. But Travis Perkins shares could rise again in the next few days, as the firm plans to carry out a share consolidation.
This means Travis Perkins’ existing shares will be replaced with a reduced number of new shares. The number will be calculated to try and “maintain broad comparability” in Travis Perkins’ share price before and after the demerger.
All of this will happen automatically — existing shareholders will see the TPK shares in their accounts replaced with new shares. The overall effect should be that the combined Travis Perkins and Wickes shares will be roughly equal to the value of Travis Perkins shares before the split.
Of course, the two companies will trade independently now, and their values may move in different directions, over time. Shareholders who don’t want to own shares in both businesses can choose to sell either Travis Perkins or Wickes.
Why split?
The reason given for the split is Travis Perkins is focused on larger trade customers, whereas Wickes is focused on DIY, home improvement and local trades — the “do it for me” market. Travis Perkins’ management believes both companies will be able to perform better independently.
Even before today’s split, both companies were said to be trading well. On 15 April, Travis Perkins issued a first-quarter trading update reporting “an encouraging start to the year.” Management said first-quarter sales at Travis Perkins and Wickes were significantly ahead of the same period last year.
Mulberry share price rockets 20%
Luxury handbag group Mulberry has been through a tough time in recent years. Mulberry’s pre-tax profit has fallen from a high of £36m in 2012 to a loss of £48m in 2020. This slump wasn’t just due to the pandemic — the group reported a £5m loss in 2019.
Finally, shareholders have had some good news. The company says that sales during the year to 31 March have been better than expected. This is due to stronger online sales and reduced discounting.
Mulberry had been expected to report a loss for the year just ended, but the company now expects to report “a small underlying profit before tax” for 2020/21.
Mulberry’s share price remains more than 85% below the highs of over 2,100p seen in 2012. But the company’s performance does seem to be improving. More details are expected in July, when Mulberry will publish its 2020/21 results.