Two weeks after reporting its 2019 fiscal results, HD Supply announced Monday that it has deferred its planned business separation due to market conditions caused by the COVID-19 pandemic.
The Atlanta-based distributor of industrial and specialty construction supplies said material changing market conditions caused by COVID-19 have impacted the timeline for the separation of HD Supply’s Facilities Maintenance and Construction & Industrial – White Cap business units into two independent companies, first announced on Sept. 24, 2019.
That initial announcement said the separation was expected to be completed by the middle of HD’s fiscal 2020, and the company’s 2019 fourth quarter earnings report on March 17 reiterated that timeframe.
“As our industry reacts to COVID-19 and the large-scale effort to contain it, we remain focused on navigating the crisis, keeping our associates healthy, serving our customers, and protecting the financial stability of our company during these unprecedented times,” said Joe DeAngelo, chairman, president and chief executive officer of HD Supply.
HD Supply said it remains committed to the separation of its two businesses and reaffirms that the strategic rationale for the separation is unchanged. “The company continues its preparation to ensure that the two companies are ready for the separation when the markets sufficiently recover,” a company press release said Monday.
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Along with the deferred separation announcement, HD Supply said Monday that in response to market uncertainty related to COVID-19, DeAngelo has voluntarily waived his base salary for the remainder of 2020, except for amounts necessary to cover pretax payroll deductions for medical coverage that are irrevocable under the tax rules applicable to cafeteria plans and payroll deductions for charitable contributions to HD Supply Charitable Fund Inc. All other elements of Mr. DeAngelo’s compensation remain unchanged.
In addition, HD Supply said its combined liquidity as of March 29 was $728 million, which includes $104 million in cash and cash equivalents and $624 million of additional available borrowings under the company’s senior asset-based lending facility. That amount is up $100 million from HD Supply’s previously announced combined liquidity of $628 million, as of Feb. 2.
HD Supply — No. 2 on Industrial Distribution's Big 50 List — reported full-year 2019 sales of $6.15 billion, up 1.6 percent from 2018, 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 total profit of $78 million fell 15.2 percent. In its Q4 earnings report and follow-up conference call with analysts, the company discussed safety measures it has taken to protect employees from the coronavirus, as well as measures taken to mitigate any potential supply chain disruptions.