Beacon Roofing Supply reported second quarter 2014 sales of $384.9 million, a 7.5% drop from year-ago sales of $416.3 million, but for the first half of the fiscal year, the company saw sales grow 0.8% to $937 million compared to $930 million in the prior-year period.
The Herndon, Va.-based specialty supplier reported a second quarter net loss of $12.1 million, compared to a net loss of $200,000 in 2013. The company attributed the loss to a combination of reduced sales due to the severe winter, reduced selling prices as a result of soft demand, and an unfavorable shift in sales mix to lower margin direct shipment and commercial business.
In addition, the company incurred increased operating expenses of $3.9 million the quarter related to new stores (greenfield locations not open last year) as the company continued to expand its footprint in existing and new markets.
For the first half of the company’s fiscal year, net income came to $2.8 million compared to $18 million in 2013.
“The Northeast and Midwest were well off last year’s sales numbers and had a combined sales miss nearly equal to the entire company miss year over year,” president and CEO Paul Isabella said during a May 9 earnings call with analysts. “This kind of sales miss has a major impact on competitive pricing and cost leveraging in those markets.”
From a gross margin perspective, the Northern and Midwest regions made up nearly 60% of Beacon’s overall gross margin miss for the quarter compared to the year-ago period. The Mid-Atlantic region had a 15% miss compared to prior year. The combined impact of the three regions contributed to the company’s total gross margin miss year over year.
However, there were some bright spots in the quarter. Gross margins were up 12% year to year in the Pacific region, 9% in the Southeast, and 4% in the Southwest.
“While weather can impact the timing of work being done, we believe it does not impact the overall demand over the course of the year,” Isabella said. “In general, the work still needs to be done and based on the severity of this winter, we feel it will translate into additional work besides the pent up demand. As a result, we believe the demand for both residential and commercial work will be strong for the remainder of the year.”
The roofing supplier opened its eighth new branch of the year and plans to open as many as 25 for the full year. “All these actions have us well positioned to take advantage of the traditionally high seasonal demand in the second half of the year,” Isabella said. “We believe the second half of the year volume will be strong for both our residential and commercial markets."