Stock Building Supply, the nation's 10th-biggest pro dealer that's soon to unite with BMC, reported today its net profit shrank 54% in the second quarter from the year-earlier period despite a 1.6% increase in net sales to $350.1 million.
Gross profit jumped 5.1% to $86.4 million and gross margins climbed to 24.7% from 23.9%, but higher selling, general and administrative expenses, $3.3 million worth of merger-related costs, and a rise in depreciation expense all led to the reduction in net income.
Raleigh, N.C.-based Stock also reported that on June 1 it acquired Guilford Builders Supply, a two-unit operation based in Greensboro, N.C., that racked up $6.2 million worth of sales last year. Stock previously had 69 facilities.
In addition, Stock said the Federal Trade Commission approved early termination of the usual waiting period for its merger with BMC, adding that the deal remains on track to close in the fourth quarter.
Stock president and CEO Jeff Rea stressed that Stock's second-quarter growth occurred "despite significant commodity deflation and unusually wet weather conditions in several key markets during the quarter." He may have been referring to Houston, one of Stock's biggest operations.
"Importantly," Rea added, "we continued to execute on our profitable growth strategy by driving higher growth rates in our value-added structural components and millwork product groups, which helped continue the upward trend in our gross margin percentage and partially offset the negative impact of deflation in lumber and lumber sheet goods."
Roughly 14.4% of all net sales came from structural components in the April-June quarter, up from 13.3% in the year-earlier period, Stock's financial statement showed, while millwork and other interior products figured in 18.4% of sales, up from 17.7%. Meanwhile, the contribution from lumber and sheet goods declined 2.5 percentage points to 33.4%.
"Our teams continue to work diligently to enhance and differentiate our customer service, profitability and growth capabilities and we are now preparing to introduce new online customer service and sales tools as an extension to our eBusiness suite," Rea said. "We believe this integrated and extensive eBusiness capability, which we expect to roll out over the next six to twelve months, will allow for a significantly enhanced customer experience while providing for increased employee productivity and growth capacity for all our locations."