Stock Building Supply president Joe Appelmann said today he expects a "challenging" next six months but is hopeful the company's severe cutbacks of late are over and is sticking with its strategic plan.
Appelmann, in an interview with ProSales at the International Builders' Show in Las Vegas, said Stock's main efforts now are to minimize losses until the housing market revives while building an operation that can be successful at that time. He also said Stock is simultaneously pursuing many market niches, including the residential, remodeling, and light-commercial markets, and is seeking to exploit synergies with its sister company, the plumbing supplier Ferguson.
The last three months have been rough for Stock, the nation's second-biggest LBM operation. On Oct. 23, the company launched a $225 million restructuring effort in which it closed 86 facilities, cut 3,000 jobs, and exited 16 markets in six states. Appelmann said today that Stock now has 207 facilities and just less than 8,700 employees in 52 markets. That's a marked drop from its 363 facilities and 13,120 workers at the start of 2008. Steve Short, Stock's senior vice president for store operations, said during the interview that the restructuring is 98% complete.
Appelmann said Stock made the changes because the company in recent years had been organized to generate growth, particularly from production builders. Such a strategy leads to higher operating costs, and thus greater potential for losses when a market shrinks. As a result, the housing downturn hurt Stock particularly severely. It recorded an operating loss of $246 million in the year ended July 31, 2008. Even with the recent cuts, Stock's corporate parent, Wolseley Plc of England, said in October that Stock could end up showing losses of up to $200 million this fiscal year.
Partly as a result of Stock's troubles, British newspapers reported earlier this week that Wolseley was exploring the idea of raising up to $593 million to strengthen its balance sheet. The results of that exploration could come Monday, when Wolseley is expected to issue a financial report.
Appelmann says he believes that once the slump ends, America could sustain a rate of new-housing starts of as much as 1.4 million per year. "When do we get there? I don't know," he said. "I expect the next six months to be challenging."
As for whether more cuts are possible, Appelmann said that while he hopes the slicing is over, "we will continue to rightsize the business. ... If housing starts stay where they are, we will continue to look at [possibly exiting] markets."
Longer term, Appelmann said Stock is continuing to diversify its revenue sources beyond residential markets. It has been pursuing the remodeling and maintenance markets for several years and is also pushing into commercial sales. But it will change how it grows, shifting from a strategy that emphasized acquisitions to one that focused on organic growth.
Appelmann also said he puts his hopes on installed sales and component manufacturing. He noted that in five years, the company's cabinet-making operation has grown from less than $10 million in sales to more than $100 million.