Wolseley’s growth slows on subdued demand

Plumbers merchant group Wolseley saw sales fall by 8%, after the group warned of slowing sales growth and higher restructuring costs.

Although Q3 sales were 10.8% higher than during the same period last year, most of this increase was the result of acquisitions and exchange rate movements. Like-for-like sales rose by just 2.8% and Wolseley said that “recent revenue growth trends have been weaker.

On 1st June Wolseley reported third-quarter revenue growth of 5.9% at constant exchange rates, with trading profits up 12.2%, however, like-for-like revenue growth since April 30, the end of its third quarter, had slowed to 1.0% from 2.8%, significantly lower than last year.

Like-for-like revenue in the UK was 0.4% lower than the same period last year as the repairs, maintenance and improvement markets remained weak, while Central Europe saw higher margins and lower costs offset a 0.2% decline in LFL revenue. In the rest of Europe the Nordic region saw revenues fall 0.9% and trading profits fall 42% as adverse weather conditions and a reduction in tax incentives impacted spring sales.

The US business, Ferguson, which accounts for 66% of group revenues, saw 5% LFL growth, including 2.3% price deflation, and trading profits increasing 17.4%, although lower commodity prices continued to impact industrial demand.

In March, Wolseley announced it would be closing 15 branches and cutting 200 jobs in the UK, but now plans to bring in additional restructuring. This will bring the total expected costs for the full year to about £20 million, rather than the £15 million originally forecast, with a full review of the UK business model expected to be completed by August.

As a result, Wolseley said, it had ‘committed to further restructuring’ as part of an overhaul announced in March that will see 14 branches closed and around 300 jobs axed.

The building supplies group said its bill for the restructuring will increase to around £20million this year, up from £15million previously.