Essendant’s ORS’s industrial unit is taking steps to diversify its exposure to the lagging energy market and focus on the “broader industrial landscape” from distributors serving the construction, HVAC and government segments.
It is one of several moves being made by Essendant — formerly known as United Stationers Supply Co. — as it expands its reach into several other areas. In its previous quarter, the company announced that it had won a number of new accounts and now expects to achieve the full benefit of those wins by May.
“To give you a sense of the impact, the run rate revenue associated with these new accounts is in excess of $100 million,” said Robert Aiken Jr., president and CEO of Essendant, in a Q1 earnings call with financial analysts.
Meanwhile, Essendant is waiting for a federal judge to make a decision whether or not to overturn an FTC decision stopping Staples from acquiring Office Depot. Essendant had agreed in February to buy the wholesale accounts business of Staples for $22.5 million but the deal would only be completed if the merger were approved. The contracts, which represent annual sales of more than $550 million, are with minority and women-owned office supply resellers, Essendant said.
“We expect the judge to rule on or before May 10. As to the closing, I think it is a function of when all of the merger conditions are satisfied.” Aiken said. “Obviously that legal ruling is a key aspect of that. We are working hard to be prepared so that when the parties are ready to close we are in a position to execute the divestiture remedies. So a lot of internal planning and work has gone on and we will continue to put ourselves in a position so that if we are able to close on that deal we are ready to go.”
Essendant achieved a significant milestone in the quarter by completing the common platform facility conversions for its core office products and Jan/San categories. Essendant now has 45 distribution centers across the country supplying its core office products and Jan/San, which account for about 80 percent of its total sales.
Essendant’s additional 29 distribution centers support its industrial and automotive businesses, representing the other 20 percent of total sales.
”The common platform is an important point of differentiation for Essendant and that allows us to sell multiple categories: office products, breakroom, food service, Jan/San and furniture with one order, one shipment and one invoice,” Aiken said. “It expands our next day fulfillment capability and broadens our product offering to customers, many of whom have prioritized category expansion and fast delivery as the way to grow their sales in the marketplace.”
The platform has been a major motivator in helping Essendant gain new business, he added.
In the quarter, Essendant reported industrial revenues were down by $9 million or 6.2 percent year-over-year as the energy and welding channels continued to be weak in the comparable quarter from last year.
The company said that business began to show sequential year-over-year improvement in March in e-commerce sales, safety, and national accounts. While performance in these segments of the business is encouraging, Essendant expects lower consumption levels will persist into the second half of the year.
Jan/San sales grew 1 percent year-over-year and swung from negative to positive within the quarter, company officials said.