HD Supply Talks Virus Measures as 2019 Sales Slow in Q4

Along with reporting its 2019 full-year and Q4 financials, the company outlined measures it has taken to maintain business while ensuring employee safety.

Hd Supply Truck
Industrial Distribution/Mike Hockett

HD Supply on Tuesday was one of the last large industrial supply companies to report its quarterly earnings for the most recent cycle, which meant it carried the obligation of addressing the impacts of the ongoing COVID-19 outbreak on its business.

So, along with reporting a modest increase in total 2019 sales despite a considerable decline in the fourth quarter, the distributor of MRO and construction supplies also updated investors on measures the company has taken on both the business front and to protect its employees.

In its Q4 investor presentation, HD Supply — No. 2 on Industrial Distribution’s Big 50 List — said it has formed a cross-functional COVID-19 response team and formed business continuity plans. The company emphasized its efforts in communications outreach to its associates and customers. Meanwhile, HD Supply has restricted company travel, and established self-quarantine resources for its associates.

Within its facilities and logistics operations, HD Supply said it has added hand sanitizer stations across facilities, increased distribution center cleanings and enacted daily truck cleanings.

"Despite ending 2019 with a solid performance, we enter 2020 with the COVID-19 virus top of mind," stated Joe DeAngelo, chairman and CEO of HD Supply. "We are committed to helping our customers succeed in these challenging times by doing everything we can to keep our HD Supply family healthy and focused."


On the financial side, HD Supply reported 2019 full-year sales of $6.15 billion, up 1.6 percent from 2018, and 2018 included an additional fiscal week compared to 2019. Organic sales growth in 2019 was 3.0 percent. HD Supply’s 2019 gross profit increased 1.2 percent to $2.4 billion and was 39.1 percent of net sales, down 20 basis points from 2018. Operating profit in 2019 was $723 million, down 0.1 percent, while total 2019 profit of $452 million increased 14.7 percent.

For the fourth quarter, total sales of $1.39 billion increased 4.2 percent year-over-year, while the quarter included an additional fiscal week compared to a year earlier. On a 13-week basis, Q4 sales grew 3.2 percent year-over-year. Q4 gross profit of $545 million decreased 4.7 percent and was 39.4 percent of sales, down 20 basis points. Operating profit of $137 million decreased 9.1 percent, while total profit of $78 million fell 15.2 percent.

By HD Supply business unit in 2019:

  • Facilities Maintenance (FM) sales of $3.13 billion increased 1.3 percent over 2018, with comparative 52-week sales up 3.1 percent. Adjusted EBITDA was flat.
  • Construction & Industrial (C&I) sales of $3.02 billion increased 2.0 percent over 2018, comparative 52-week sales up 2.9 percent. Adjusted EBITDA up 0.6 percent.

By HD Supply business unit in Q4 2019:

  • Facilities Maintenance (FM) sales of $702 million decreased 4.6 percent year-over-year, with comparative 13-week sales up 2.8 percent. Adjusted EBITDA was down 60 basis points.
  • Construction & Industrial (C&I) sales of $685 million decreased 3.7 percent year-over-year, with comparative 13-week sales up 3.8 percent. Adjusted EBITDA was down 20 basis points.

By month in Q4, HD Supply's total sales for November, December and January were $436 million, $403 million and $546 million, respectively. There were 18 selling days in November, 19 in December and 24 in January of HD’s fiscal 2019, compared to 18, 20 and 28 selling days during those months in 2018 respectively. Average year-over-year daily sales changes for November, December and January were an increase of 2.5 percent, a decrease of 6.8 percent and an increase of 12.7 percent, respectively.

HD Supply said that preliminary February sales were $460 million, with average daily sales up approximately 8.8 percent — up 4.1 percent in FM and up 14.2 percent in C&I.

Due to the market volatility due to the COVID-19 outbreak, HD Supply did not issue a fiscal guidance in its Q4 earnings report.

HD Supply previously announced Sept. 24 that it will split into two equal-sized companies by mid-fiscal 2020. The company reiterated that timeframe in its earnings report Tuesday, subject to closing conditions.

HD Supply’s Form 10-K with the US Securities and Exchange Commission stated that the company operates approximately 270 branches and 44 distribution centers in the US and Canada, and has approximately 11,500 associates. HD Supply serves approximately 500,000 customers and the company has approximately 600,000 SKUs of product inventory.

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