Chip Hornsby, the new chief executive of Wolseley North America, discusses the wholesaler's plans in an exclusive interview with SUPPLY HOUSE TIMES.

Chip Hornsby
Synergy. If you saw the movie, “In Good Company,” you can chuckle over the word. But when Chip Hornsby, the new chief executive of Wolseley North America uses the term, it is no laughing matter. In his newly created position, Hornsby will retain his role as president/CEO of Ferguson Enterprises, and oversee Wolseley's other investments in North America: Stock Building Supply and Wolseley Canada (formerly Westburne). When he uses “synergy” in this context, Hornsby refers to his intention to leverage the strengths of all three organizations.

Combining the three entities into Wolseley North America was not meant to be a cost-cutting move, he says. “It is an initiative to continue to support the growth we have been able to accomplish over the last several years and create a structure that can prepare and react to market changes,” he explains.

“There will still be three individual business units: Ferguson in Newport News, Va.; Stock in Raleigh, N.C., and Wolseley Canada in Toronto,” Hornsby says. “Wolseley North America will be the umbrella with senior executives assigned to developing strategic initiatives, identifying opportunities and coordinating the supply chain. The majority of the work performed and money produced will be in the existing business units. We are focused on leveraging existing resources vs. creating additional overhead.”

Wolseley's goal for its companies remains the same: to double in size every five to seven years. That translates into a compounded 10% to 15% growth rate.

Customer Focus

“Synergy for us means going to national, regional and local professional contractors with a package that provides them with a streamlined process,” Hornsby says. The three entities of Wolseley North America sell virtually everything a contractor needs except for rough-in electrical and wet concrete.

“Between Ferguson, Stock and Wolseley Canada, we can assist professional contractors in meeting their needs for framing, custom doors and windows, carpeting, cabinets, as well as a vast array of plumbing and heating products,” he says. “Working together, we can develop programs that are focused on expanding the services we offer existing customer segments and bring greater attention to new, changing, or growing segments. For example, though we sell repair and remodel contractors today, we can create new programs that focus on meeting the needs of this growing segment.”

The distribution centers currently supporting Ferguson in meeting the needs of its customers will become a North American asset and used by all the Wolseley North America companies. In addition to plumbing, these centers will begin to support branches with building products. The wholesaler is in the process of adding 1.5 million sq. ft. to its distribution centers.

Stock, a $3.5 billion+ lumber distribution business that sells primarily to builders and general contractors, was acquired by Wolseley in the mid-1980s.

“Stock has about one-third of the locations Ferguson does, and presents a huge opportunity for growth,” Hornsby says. “In markets that we share, we frequently find ourselves servicing the same jobsites. There are opportunities for us to understand how we can uniquely meet the needs of our customers.”

Wolseley Canada is similar to Ferguson in product mix and customer base, but it is truly independent and has Canadian flair, he notes. Its demographics are quite different from Ferguson's. There are fewer people in Canada than in the state of California and the country has six time zones. Much of the population is concentrated in Toronto, Montreal and Vancouver, with most no more than about 100 miles north of the U.S. border.

“We see opportunities to work closely with them on customers and suppliers that go back and forth across the border and, also, share best practices,” Hornsby says.

Shared Branches

Another way synergy will function in the new Wolseley North America is with shared branches. Currently between Ferguson and Stock the company has 20 locations that have a branch within a branch, or a business within a business, Hornsby says.

In some cases Ferguson has entered a Stock facility and opened a showroom or Xpress Counter. In other cases Ferguson has added products like waterworks to a Stock location. Stock recently leveraged a portion of the Ferguson property in Alaska to open up in this market. The companies have recently opened a combined Ferguson/Stock showroom in Chapel Hill, N.C. This location offers a wide range of products including doors, staircases, carpeting, countertops and paint, along with plumbing, appliances, lighting and cabinets.

Management Restructuring

To enable Hornsby to address his increased responsibilities, John Stegeman has been appointed chief operating officer at Ferguson. He will take over much of the day-to-day duties for that organization, including profit and loss monitoring for the branch operations and the human resources function.

Dave O'Halloran has been appointed chief financial officer of Wolseley North America and Mike Brooks, vice president of information technology. In addition, senior vice presidents have been named to oversee the wholesaler's three components of growth: same store sales (organic growth), new store openings or locations, and acquisitions. Frank Roach is senior vice president of business groups; Larry Stoddard is senior vice president of business development; and Tom Mitchell is senior vice president of acquisitions. As senior vice president of supply chain, Al Byrd will oversee the distribution center network.

Other appointments include John Wilcox, named to senior vice president of alignment; Jim Feltman, senior vice president of strategic planning; Doug Strup, senior vice president of Ferguson branch operations; and Gary Robinette, executive vice president of Stock branch operations. Fenton Hord and Paul Lachance will continue in their respective roles as CEO of Stock and CEO of Wolseley Canada. Also, John English oversees investor relations for Wolseley North America.

Hiring For Growth

During its latest fiscal year, Ferguson's associate base has expanded from less than 14,000 to well over 15,000, Hornsby reports. The number of associates for all three companies that comprise Wolseley North America now totals 25,000.

This number will continue to grow. Hornsby says 1,000 college graduates are joining the company this year, up from about 600 who joined last year. The graduates enter the company's management training program, in which they do short stints in the warehouse and other areas of the business.

“We get a lot of business majors but we also attract liberal arts majors,” Hornsby notes. “We look for people skills and the ability to perform well in groups, such as students who participate in intramurals, fraternities and sororities. We will teach them the business. You don't need an engineering degree to sell plumbing.”

Growth Opportunities

Leveraging the strengths of the three companies provides some unique growth opportunities. Combined with Stock, Ferguson is able to provide builders and residential customers the “Whole House Solution,” Hornsby says. From another perspective, Ferguson is working closely with Stock to expand Stock's commercial presence, an area where Ferguson has significant market share with mechanical contractors.

For Wolseley Canada, opportunities for growth include entering and expanding specialty businesses similar to what has been done at Ferguson, expanding showrooms and placing more emphasis on counter sales and waterworks.

Within Ferguson there are various growth initiatives, and one of these is to continue to expand Xpress locations. Designed to serve as convenience stores that support the contractor, they are typically 3,000 sq. ft. with no warehouse or outside storage, located within 15 minutes of the customer. Xpress locations maintain a consistent inventory, with stock replenished daily. Currently Ferguson operates more than 15 Xpress locations nationwide and plans to open 60 during this fiscal year. Earlier this year, the wholesaler opened its fifth Xpress in the metropolitan Boston area.

Questions And Answers

Following are excerpts from a question and answer session with Chip Hornsby:

Q: What are some of your proudest accomplishments since becoming Ferguson's fourth president and CEO in 2001?

Hornsby: The capabilities of our organization. Through our people we have been able to grow at a very rapid rate. The investment we make in developing leaders and all the training we do. We continue to practice the same mantra: Take care of your people and they will take care of your customers. Customer service is at the forefront.

Q: What have been some of the biggest challenges during your tenure as president/CEO?

Hornsby: Human resources and being able to support our significant growth initiatives. This is particularly true in those markets where, from sheer demographics, it looks like labor will be more difficult. We have to be certain that we have the people capable of supporting our perpetual growth.

Q: Do you see acquisition activity by Ferguson and the other North American businesses increasing, decreasing or staying the same?

Hornsby: Our acquisitions will be increasing. We will be more proactive in seeking out opportunities. Tom Mitchell, former chief financial officer of Ferguson, has accepted responsibility for acquisitions for all of North America. In the past we have been very reactive. Now we plan to pursue opportunities not just in plumbing but also in the builder sales area.

Q: How is Ferguson's ProFlo private label initiative doing?

Hornsby: Our private label initiative continues to meet our expectations with our targeted customer segment. The ProFlo brand is and has always been focused on our customers who do not buy on brand but require quality products, competitive price and consistent availability. By focusing on this segment we have been able to meet our customers' needs, leverage our size and manage the duplication of product lines across the company without negatively impacting the branded manufacturers that we distribute. We feel we have balanced the needs of our company, customers and our manufacturers very well.

Q: We've heard about Ferguson's Destination Showroom concept. What can you tell us about this?

Hornsby: The destination showroom concept is based on our belief that the quality of the experience you provide in the showroom is much more important than the number of showrooms you have in a market. Consolidating showrooms into major “destinations” allows Ferguson to exceed consumer expectations. The critical focus is on having knowledgeable associates, beautiful displays and outstanding customer service. Our showrooms are an extension of our contractors' business and we understand our responsibility to them.

Q: Do you believe there will always be room for independent wholesalers at the local and regional levels?

Hornsby: Absolutely. When you look at the magnitude of this industry and the ability for an independent wholesaler to focus on a single customer segment, there will always be room for independent wholesalers. This is still a relationship business. People buy from people they like. There will always be opportunities for local niche players that have relationships.

Sidebar: Working Together: Ferguson and Stock

Stock Building Co. and Ferguson operate a joint showroom in Chapel Hill, N.C. Stock was looking for a new facility in the area and the tenant next to the Ferguson in Chapel Hill was moving. The two companies decided to join forces for a one-stop shopping source and tore down the wall between the tenant spaces to create one store. It has been operating since November 2004.

The location leverages the size of both Ferguson and Stock in the market to customers, according to Sharon Cole, president/general manager of Raleigh, N.C.

“Ferguson and Stock reviewed their customer lists and were delighted to find that we were not selling the same customers, so there is upside for both Ferguson and Stock,” Cole says. It is not unusual for customers to fly in from out of town to make selections at this store, she adds.

Ferguson and Stock have begun holding joint sales meetings, customer trips, and networking functions to grow their knowledge of each other's business, as well as increase sales for both companies, she says.

Ferguson and Stock are making a group effort to approach the market as one company.