Reading, England-based Wolseley — No. 1 on Industrial Distribution's 2016 Big 50 List — reported its 2016 full year fiscal results on Tuesday, led by announcing consolidation in its Nordic business and a considerable decline in the companies industrial segment.
The company posted total 2016 sales of $18.72 million, up 4.2 percent year-over-year at constant exchange rates, with like-for-like growth of 2.4 percent. Wolseley's total profit of $1.2 billion was up 1.6 percent at constant exchange rates.
While the overall growth figures were positive for 2016, there was a large disparity geographically. The company's U.S. sales of $12.26 billion — 65.5 percent of the business — grew 6.3 percent at constant exchange rates. The company's U.K. sales of $2.59 billion — 13.8 percent of the business — declined 17.8 percent. The company's Nordics sales of $2.44 billion — 13.0 percent of the business — declined 17.6 percent. Wolseley's Canada and Central Europe sales of $1.42 billion — 7.6 percent of the business — declined 0.2 percent.
In Q4, U.S. sales grew 3.1 percent. U.K. declined 2.1 percent in Q4, Nordics declined 2.3 percent, while Canada and Central Europe grew 0.3 percent.
In Tuesday's fiscal release, Wolseley announced a U.K. 'turnaround and repositioning strategy,' which includes the closure of 80 branches, one distribution center and up to 800 job losses. The job cuts will 'commence shortly' and are expected to take 90 days. The restructing will incur charges of about $130 million. Wolseley said the move will take two to three years and will generate $32 to $39 million of annual cost savings.
The company said a review of its Nordics operating strategy is also underway.
“Our review of U.K. operational strategy has identified opportunities to transform our customer propositions whilst simplifying our branch network and supporting logistics facilities to greatly improve service levels, drive availability and choice for customers and generate better returns for shareholders," said John Martin, Wolseley Group Chief Executive. "Regrettably this will result in job losses which we will handle sensitively and minimise through redeployment and attrition as far as possible."
"We need to exit these [branches] now and it will take a long time to exit," Martin went on to say, according to U.K.-based The Telegraph's report following Wolseley's conference call with analysts. "We've made the decision to close those branches because... we believe we can service those areas with less real estate."
In the U.S. — which represents 81 percent of Wolseley's trading profit — the company's Ferguson subsidiary posted year-over-year sales growth of 6.2 percent at constant exchange rates and 4.1 percent on a like-for-like basis. Of the like-for-like growth, acquisitions contributed 1.9 percentage points of the gain. Price deflation in 2016 was 2.2 percent. Like-for-like growth was 3.1 percent in Q4.
Here's how Wolseley's U.S. end markets performed in 2016 at constant exchange rates:
- Residential (45% of U.S. sales): +10%
- Commercial (28% of U.S. sales): +7%
- Municipal (15% of U.S. sales): +6%
- Industrial (12% of U.S. sales): -10%
Here's Ferguson's 2016 like-for-like sales growth by business unit:
- Blended Branches (61.2% of sales): +4.0%
- Waterworks (15.8% of sales): +4.3%
- HVAC, Fire & Fabrication, B2C, MRO (15.6% of sales): +11.7%
- Industrial Standalone (7.5% of sales): -7.8%
Wolseley said e-commerce accounted for 19 percent of Ferguson's 2016 sales.
Ferguson made 13 acquisitions in 2016, with those companies posting $119 million in sales. Ferguson opened 21 branches in 2016, with another 26 opening from acquisitions. Ferguson's employee headcount grew 4 percent, of which 2 percent came from acquisitions.