Stock Building Supply executives and an official from the company's new majority owner said today they expect America's No. 2 LBM company could shrink further.
"Stock senior management has presented The Gores Group with a financial plan which requires us to take the hard actions this housing downturn dictates. We will be exiting or reducing capacity in some markets," Stock declared in an FAQ page posted on its website shortly after the announcement of the deal involving Gores, a private equity firm based in Los Angeles. "In the coming days and weeks, we will be determining the best way to exit these locations, which may involve either a sale or orderly wind down of the operations. We are in the process of communicating this to our effected locations and associates and are not sharing any other information at this time. We will release more information after the process is complete."
The ProSales 100 report, also released today, showed that Stock had sales totaling $3.2 billion in calendar year 2008. That's a 24% drop from 2007. In the six months through Jan. 31--the first half of its current fiscal year--Stock recorded an operating loss of $129 million.
The company, which sought to capitalize on the residential housing boom a few years back, started shedding workers and locations as the downturn came. At one point it had 363 locations and roughly 17,000 employees. A court petition filed today in bankruptcy court as part of Stock's Chapter 11 filing said the company closed 26 facilities between August 2006 and July 2007, 35 more between August 2007 and July 2008, and close to 100 yards since then. Meanwhile, the employee count had sunk to about 8,700 at the end of 2008.
As for which yards will go next, a petition filed today refers to roughly 22 locations identifed as being on a "Marked for Closure Master Leases" list. Some facilities were to be subleased to generate income, but with the change in majority ownership Stock now is seeking a federal bankruptcy court's permission to terminate the master leases.
In addition, in an interview late today with ProSales, The Gores Group's executive vice president of business development and marketing said closings could continue because "good companies never stop doing that." But he added: "From here, we are going to focus the company, we are going to grow the company and we are going to build value in the company."