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.”