Falling lumber and structural panel prices have led to the decision to close an additional 24 branches of Stock Building Supply, reducing headcount by 370, primarily in the Midwest.
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
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.
July 18, 2007 - Stock Closes More Branches, Wolseley Canada Integrates Into Ferguson
July 18, 2007