Stock Building Supply shoulders $89 million loss
Stock Building Supply, the second largest pro dealer in the United States, posted an $89 million loss for the six-month period ended Jan. 31. This compares to profits of $81 million for the same period a year ago.
Revenues were reported at $1.79 billion, down 25.7 percent from sales of $2.4 billion during the comparable period last year.
Stock’s parent company, U.K.-based Wolseley, saw its profits drop 23 percent, to approximately $595 million, during the six-month period. The worldwide distributor of plumbing/HVAC supplies and building materials attributed most of the decline to Stock.
In response, Wolseley reduced the head count at Stock by 1,750 people during the period and closed 22 branches. The state of Florida saw its Stock locations reduced from six to two.
In a conference call with analysts on March 17, Chip Hornsby, Wolseley’s CEO, indicated that “further action” could be taken if the commercial and industrial markets weaken. But Hornsby declined to be more specific about where the cuts might be.
“We will continue to look at the business region by region and take cost out where the current conditions and outlook warrants it,” he said. “We will continue to adopt this approach going forward, but we will not sacrifice customer service.”
Putting aside labor costs, Hornsby named bad debts and accounts receivables as two of the company’s biggest challenges in the United States. Receivable days have expanded by 3.7 days over the last year, he said. Payable accounts have increased by eight days, or approximately 13 percent, reflecting renegotiated terms with many of Wolseley’s suppliers in both North America and Europe.
The downturn is driving some of Stock’s smaller competitors out of business, Wolseley executives said, estimating that 140 dealers in 15 of Stock’s major markets closed between December and March. But Hornsby resisted analysts’ calls to snap up distressed lumberyards, saying that valuations are “out of line with what businesses are worth.”
“It’s too early,” Hornsby explained. “They want to talk to you about what they did in 2005. We’ve [still] got some time to go.”
Stock’s sister company, Ferguson, turned in a stronger performance during the six-month period, with revenues rising 3.2 percent to $5.5 billion. Profits were up by 4.9 percent to $350 million. In response to the slowing residential market in the first half of its fiscal year, Fergus on reduced its head count by 1,575, approximately 6 percent of its total employees.
Hornsby expressed confidence in the U.S. housing market, which will ultimately be rescued by population growth, he said. A former regional vp in Florida during the recession of the 1990s, Hornsby said he’s taking a “realistic long-term view.”
Bed Bath & Beyond declines in fourth quarter
Specialty retailer Bed Bath & Beyond posted weaker fourth-quarter earnings, due in part to an extra week in last year’s fourth quarter. The company saw earnings of $172.9 million, down 16 percent from $205.8 million in the same period last year.
Net sales for the fourth quarter were $1.93 billion, down 3 percent from last year’s fourth quarter. Comparable-store sales for the fiscal fourth quarter of 2007 decreased by 0.4 percent.
For the fiscal year, which again was one week shorter than the previous fiscal year, the company saw earnings decline 5.3 percent to $562.8 million from $594.2 million a year ago.
Net sales for the year were $7.049 billion, an increase of 6.5 percent from last year. Year-over-year, comparable-store sales increased by 1 percent. The company opened 22 new stores in the fourth quarter, including its first location in Canada.
The retailer said it expects comparable-store sales to be relatively flat or negative in 2008. Bed Bath & Beyond also warned investors it expects a per-share percentage decline in 2008 earnings from the low double-digits to mid-teens.
Bed Bath & Beyond operates a total of 971 stores nationwide.
Canfor reduces production
Vancouver, B.C.-based Canfor is reducing its production volume to reflect market realities. The company pointed to “falling demand and poor pricing for softwood lumber with no indications of a market recovery in the near future.”
Canfor will be reducing workweeks at a number of its operations. In addition, Canfor’s Prince George Sawmill will move from three shifts to two and its Clear Lake finger joint operation from two shifts to one. This move will reduce Canfor’s annualized lumber production by approximately 600 million board feet.