HD Supply Inc. is operating in a changing market marked by consolidation and growing online competitors selling industrial, construction and maintenance products. But its senior executives say their company is positioned to continue steady growth.
CEO Joe DeAngelo, when asked on a second-quarter earnings call today how HD Supply can compete against e-commerce rivals as well as more traditional distributors, said much of the new online competition does not serve HD Supply’s base of large corporate clients. He added that most of the expansion he’s noticed in online products and services is catering to “various very small customers” that are not typically targets of HD Supply.
He added that many of HD Supply’s more traditional competitors—typically local and regional distributors that sell mainly through physical outlets and sales reps—have been acquired by larger companies and have not changed their mix of products and services. “They’re behaving the same way when they were by themselves,” DeAngelo said during the conference call, which is recorded on HDSupply.com.
In the meantime, he added, HD Supply is stepping up its investment in e-commerce technology, mobile applications, supply chain systems and its team of sales reps to improve how the company interacts with customers and to offer easier ways to accurately place orders. He noted that HD Supply will spend “$10 million to $20 million” on such projects in the remaining months of its current fiscal year, which runs through next July. He noted that planned improvements in “data analytics, supply chain and category management capabilities [will] help us deliver [customer] orders on time by ensuring we have the correct inventory and most effective customer delivery process.”
HD Supply doesn’t break out e-commerce revenue, but says it processes much of its sales through its two main e-commerce sites: HDSupplySolutions.com for facilities maintenance, repair and operations, or MRO, products; and WhiteCap.com for industrial and construction products and materials. It also operates HDSupplyHIS.com to sell home improvement products to contractors and do-it-yourself consumers, but says this is a relatively small part of its business.
For the second quarter ended July 30, HD Supply reported:
- Net sales of $1.352 billion, up 5.4% from $1.283 billion a year earlier;
- Gross profit of $813 million, up 5.6% from $770 million, resulting in a profit margin virtually unchanged at 39.9%;
- Net income of $442 million, up more than four-fold from $98 million. The increase in net income was primarily due to a $323 million tax benefit related to the sale of the company’s Waterworks piping systems products business.
For the six months ended July 30, HD Supply reported:
- Net sales of $2.568 billion, up 4.4% from $2.459 billion a year earlier;
- Gross profit of $1.023 billion, up 4.2% from $982 million, resulting in a profit margin of 39.8%, down slightly from 39.9%;
- Net income of $527 million, up from $86 million.
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