Universal Forest Products Inc. (UFPI), hit by a slump in sales and margin, announced Friday plans to to cut annual costs by $10 million, which does not include severance charges related to the realignment.
The company did not reveal who or what would be cut as a result of the cost reductions. It did note that sales for the first five months of the year had dropped 9.5% from the year-earlier period to reach $765 million. That decline includes a 15% fall in net sales to retail customers. It also said its gross margins had shrunk 10.5%, which it attributed to a slide in the lumber market and high fuel prices.
UFPI suffered drops in both sales and net earnings during the first quarter 2011. The company cited soft consumer spending and lack of demand for its products are the reasons for the poor performance. Company officials do not expect such demand to pick up for the rest of the year and that the company's treated wood products are taking the brunt of the impact.
"Retail sales during what is historically our busiest selling season didn't materialize as expected this year," said CEO Michael B. Glenn. "In order to preserve our opportunity for profitability and to ensure we're properly sized for our business opportunities moving forward, we have undertaken additional cost-cutting measures."
The company also announced plans to change its organizational structure to "more strongly position it for improving sales and profitability." It recently put Don James in charge of national sales and changed the title for executive vice president of sales and marketing Joseph Granger to executive vice president overseeing Universal Consumer Products, Inc., and UFP Distribution, LLC.
"These are critical business ventures and markets for Universal, and this new leadership structure will enhance our opportunity for growth and success in each," said Glenn.
The restructuring comes following an announcement earlier in the week that Glenn will resign for the company citing health reasons and to make way for new leadership. Glenn will remain as CEO until a successor has been picked.