HD Supply Committed to Separation After Facilities Maintenance Hit Hard in Q1

In the company's Q1, which spanned Feb. 3 to May 3, its Facilities Maintenance segment fared far worse than its Construction & Industrial segment.

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Industrial and construction supplies distributor HD Supply reported its 2020 first quarter financial results on Tuesday that spanned Feb. 3 to May 3, which covered most of the worst of the COVID-19 business impacts.

The company said it remains committed to the planned separation of its two business segments — Facilities Maintenance and Construction & Industrial — stating that the transaction is still planned for the second half of fiscal 2020 if market conditions allow. If too much uncertainty persists, the separation will likely happen in Q1 2021.

In Q1 2020, HD Supply's total sales of $1.40 billion were down 6.6 percent year-over-year, with Facilities Maintenance (FM) taking a much harder hit than Construction & Industrial (C&I). FM sales of $682 million fell 11.7 percent. while C&I sales of $713 million dipped 1.1 percent.

Meanwhile, HD's Q1 gross profit of $550 million fell 6.0 percent year-over-year and was 39.4 percent of net sales, up 20 basis points. Operating profit of $121 million sunk 28.8 percent and was 8.7 percent of net sales, down about 270 basis points, while total profit of $72 million fell 32.7 percent year-over-year.

By month in Q1, HD's net sales for February, March and April were $461 million, $462 million and $472 million, respectively, with average year-over-year daily sales changes for those months went from up 8.8 percent in February to up 0.5 percent in March and a drastic swing to down 22.6 percent in April. The company's preliminary May sales of $431 million were down approximately 7.3 percent year-over-year in average daily sales, down 13.4 percent in FM and down 1.4 percent in C&I.

"The COVID-19 pandemic has created extraordinary challenges, but our focus has remained clear. We have prioritized the health and well-being of our associates and their families while continuing to serve our customers and our communities. Our associates have worked tirelessly to fulfill our responsibilities and I am proud of each and every one of them," stated Joe DeAngelo, Chairman and CEO of HD Supply. "We are encouraged by improving results in May, and we will continue to support our customers and communities as they work to safely resume economic activity."

Previously in its 2019 Q4 earnings report, HD Supply said that DeAngelo voluntarily waived his base salary for the remainder of fiscal 2020.

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