July 18, 2007 - Stock Closes More Branches, Wolseley Canada Integrates Into Ferguson
Parent company Wolseley plc, Reading, England, said that lumber and structural panel, which combined account for about 45% of Stock’s sales, have fallen by 21% and 27%, respectively.
Raleigh, NC-based Stock’s trading profit was down by two-thirds for the 11 months ended June 20, after charging the previously announced one-off costs of some $11 million, relating to 22 branch closures and headcount reductions of around 4,500 (25% of total employees). These earlier closures and reductions were reported in Wolseley’s unaudited interim results for the period ended Jan. 31, 2007.
However, Wolseley pointed out that Stock has continued to outperform the market with organic sales volumes down by 15%, compared with average housing starts which were 25% lower at 1.5 million, compared to 2.1 million in the prior period.
Stock’s remaining branch network will comprise 287 branches across 33 states.
Meanwhile, Wolseley reported that Newport News, VA-based Ferguson continued to take market share and saw sales in local currency rise by about 15 for the 11-month period. About 6% of that was organic growth, the company noted. Trading profit was up by about 20%. This performance was attributed to the diversity of Ferguson’s business, its specialist product offering and a focus on cost efficiency.
The new residential market in the United States continues to be challenging, but the repairs, maintenance and improvement market and the commercial and industrial sectors continue to provide opportunities for growth, Wolseley said.
In related news, Wolseley announced that Wolseley Canada, Burlington, ON, will be integrated into Ferguson effective Aug. 1, operating within the same business group structure which focuses on specific customer types. It will benefit from leveraging the U.S. operations, including the distribution center network.
Wolseley Canada achieved modest local currency revenue growth for the 11-month period, although trading profit was lower vs. the comparable period last year, primarily due to lower activity levels in the exploration industries in western Canada.
Wolseley reported that sales (in sterling) for its North American businesses, including Ferguson, Stock and Wolseley Canada, including acquisitions, declined by about 4% vs. the same period last year.
Trading profit for the North American businesses (in sterling), including acquisitions, was down by about 17%, after charging previously announced one-off costs relating to headcount reductions and branch closures.
The aggregate local currency revenue from the group’s U.S. businesses, including acquisitions, was about 5% higher, but U.S. trading profit was down by around 10%. U.S. dollar weakness has led to an 8.5% adverse currency translation impact when U.S. results are reported in sterling.
Wolseley said there are no signs of any upturn in the U.S. housing market and the timing of any recovery remains uncertain. The repairs, maintenance and improvement market and the commercial and industrial markets are expected to continue to provide good opportunities for growth.
“The group has reacted swiftly and decisively to the difficult conditions in the U.S. housing market and will continue to pursue its strategy to create competitive advantage and shareholder value from its leading market positions and excellent platform for future growth,” Chip Hornsby, group chief executive, said in a statement.
The group will continue to target margin improvement by pursuing initiatives relating to supply chain, sourcing and private label and by ensuring that maximum benefits are derived from the investments in facilities, technology and people, while continuing to focus on the cost base, Wolseley said. The group is well positioned to benefit from any recovery in the U.S. new housing market and expects to continue to make good progress in other markets which account for about three-quarters of its revenue.
All of this was announced in Wolseley’s regular trading statement, prior to entering its close period. Preliminary results for the year ended July 31 are scheduled to be released Sept. 24.