Stock Building Supply recorded an operating loss of around $60 million in its fiscal first quarter ended Oct. 31, Stock's U.K.-based parent, Wolseley Plc, reported today. That operating loss at America's second-biggest LBM operation came on a 20% decline in sales and was 10 times worse than it posted in the year-earlier quarter.
Wolseley also said it initiated headcount reductions in its fiscal first quarter totaling around 3,400. On Oct. 23, Stock announced it will close 86 facilities, cut 3,000 jobs, and exit 16 markets in six states, leaving it little more than half the size it was at the housing market's peak. The branch closures should be completed by the end of this month, Wolseley said today. (Click here for a list.)
Stock said today it was hurt during its fiscal first quarter by a 31.1% fall in housing starts since the July-October 2007 period and an 11% fall in lumber prices over the same period. "However the gross margin shows increasing signs of stabilising,. As a partial result, Stock received only 65% of its revenue from the new residential market vs. 74% a year before. But Stock also noted that it has been working to expand its presence in the remodeling and commercial markets.
The cuts are the result of a strategic review that Wolseley Plc, Stock's British-based parent, launched following Wolseley's report last month that Stock recorded an operating loss of $246 million in the year ended July 31. The 86 branches to be closed represent around 25% of Stock's revenue and 28% of its headcount, Wolseley's board said in a statement.
Recent ProSales 100 reports have shown how Stock has sought to trim its operations as the market shrank. At the end of 2006, it said it had 384 branches and roughly 17,000 employees, but by the end of 2007 it said it had 363 branches and 13,120 employees. As of July 31, it was down to 285 branches. Once the latest 3,000 positions are cut, Stock will have about 8,700 employees, or 55% of what it had at the peak, at just over 200 locations in 27 states, Wolseley said.
Wolseley said that if average annual housing starts in the United States hit 750,000--they're at about a 1 million annual rate as of September--and if lumber prices reach around $240 (it didn't specify which lumber figured into that number), then it believes what's left of Stock will "reduce the annualized run rate of losses by around $100 million and result in losses of less than $200 million, for Stock, in the year ending 31 July 2009."