Our view As expected, the Q1 update confirms a weak volume performance, not helped by a strong comparative in Merchanting which does ease as the year progresses. Price inflation is slowing but remains significant and a good offset to the volume fall in Q1. Toolstation saw better LFL growth, helped by an easier comparative. While price inflation is expected to slow as the year progresses, the comparative also eases in Merchanting, and with support from cost savings management expects to deliver a full year performance in line with market expectations. Consensus for FY23 is unlikely to change materially today, as it factors in a c.1% revenue fall and a significant fall in profits. The share price is down significantly from the recent high. Update summary The trading update confirms a challenging start to the year, with weak volumes but full year expectations unchanged. Q1 Group LFL sales were down by -2.9% with price +8.7%, and volumes were therefore down by over 11%. Merchanting saw the weakest performance with sales impacted by a weak new housing and domestic RM&I market; the commercial and industrial markets were more resilient. Total Merchanting sales were down by -4.7% in Q1, with LFL sales down by 4.2% and with price inflation of +9%. Toolstation delivered a good performance in Q1 with sales up by +8.6% and LFL sales growth of +4.6%, including price inflation of +7.6%. The business has begun the commission of the new distribution centre in UK, which is on track to be completed by Q3 2023. Toolstation Europe enjoyed sales growth of +14% in Q1. As anticipated, trading conditions were challenging in Q1 and management continue to expect to deliver a full year performance in line with market expectations. Valuation The shares are up by only +7% YTD and reside on FY23E PE and EV:Sales multiples of 11.5 times and 0.56 times respectively.