Essendant Inc., battling decreases in revenue across five of its seven product categories, says it’s moving ahead with a policy designed to grow sales while also cutting operating costs. One of the keys to its plan is helping its online reseller clients deal with the increased expense tied to fulfilling smaller orders received on their own business-to-business e-commerce sites.
The company, a diversified distributor of office supplies, maintenance products and industrial products, said net sales declined 7.0% for the third quarter ended Sept. 30, to $1.309 billion from $1.408 billion. It reported a net loss for the period of $81.94 million, more than double the year-earlier net loss of $36.74 million.
“Challenging industry dynamics and sales declines persisted, particularly in our national accounts channel,” Ric Phillips, president and CEO, said in a conference call with stock analysts last week, according to a transcript from Seeking Alpha. “This year’s sales declines were largely unanticipated and outpaced our ability to reduce costs.”
Phillips, who recently took over as the permanent chief executive after serving as interim CEO following the departure earlier this year of former CEO Bob Aiken, said he’s been working with his senior management team and the Essendant board to develop a multi-part plan to improve financial performance. The plan includes driving up sales in such key categories as janitorial and sanitation products, and industrial products.
The plan also includes offering more assistance, such as drop-shipping services, to resellers who are facing increased expenses related to fulfilling many smaller orders received online. It also includes steps to increase labor productivity and cut overall operating costs by more than $50 million by 2020. “We will act with urgency to execute against these priorities and reset our cost structure,” Phillips said.
Essendant broke out the following financial figures for its seven major product categories:
- JanSan Products—Revenue of $342.9 million, a decrease of $35.5 million from a year earlier, or 8.0%, primarily driven by declines in the national retail channel;
- Technology Products—Revenue of $320.7 million, a decrease of $26.4 million, or 6.1%, as a result of declines in the national retail channel;
- Traditional Office Products—Revenue of $202.7 million, a decrease of $26.7 million, or 10.2%, resulting from sales declines in the national retail channel and the independent dealer channel;
- Industrial Products—Revenue of $143.4 million, an increase of $3.1 million, or 3.8%, due to growth initiatives and energy market recovery;
- Cut-sheet Paper Products: revenues of $110.3 million, an increase of $0.6 million or 2.2%, primarily driven by growth in sales to internet retailers.
- Automotive Products—Revenue of $75.7 million, a decrease of $2.9 million, or 2.2%, driven by timing of promotional activities.
- Office Furniture—Revenue of $72.1 million, a decrease of $10.1 million, or 10.9%, primarily driven by declines in the independent dealer and national retailer channel.
For the third quarter ended Sept. 30, Essendant, No. 105 in the B2B E-Commerce 300, reported:
- Net sales of $1.309 billion, down 7.0% from $1.408 billion a year earlier;
- Gross profit of $172.1 million, down 13.4% from $198.9 million;
- A net loss of $81.9 million, compared with net income of $36.7 million.
For the nine months ended Sept. 30, Essendant reported:
- Net sales of $3.84 billion, down 6.6% from $4.11 billion a year earlier;
- Gross profit of $535.2 million, down 10.1% from $595.6 million;
- A net loss of $265.4 million, compared with net income of $66.2 million.
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