HD Supply Inc. punched up investment in its e-commerce site, sales force and mobile app in 2017 thanks to the sale of a business unit. Company executives pledged to invest more in those areas in 2018 on its Tuesday year-end earnings call.
“We accelerated our investment in the Facilities Maintenance business after the sale of Waterworks,” CEO Joe DeAngelo said on the call, according to a transcript of the call from Seeking Alpha. “We accelerated a $10 million investment in 2017, and we expect to invest an additional $12 million in 2018, in both our selling channels and our enabling functions. Investments within our selling channels are being made in our sales force, our e-commerce site and our mobile application. Investments within our enabling functions are focused on data analytics, supply chain and category management capabilities.”
Waterworks, the water, sewer and fire protection products business, was sold in August to New York investment banking firm Clayton, Dubilier & Rice for $2.5 billion in what DeAngelo termed “an extremely efficient transaction that netted proceeds of $2.4 billion after taxes and transaction costs. This transaction allowed us to improve our business mix and give us greater flexibility to accelerate investment spend for long-term growth.”
Waterworks was rebranded Core & Main and has more than 240 branch locations.
HD Supply, a distributor of industrial and maintenance products that sells through three e-commerce sites and a team of sales reps, consolidated its business units to two—Facilities Maintenance and Construction and Industrial—from six last year as it embarked on a restructuring initiative. “We incurred $6 million of restructuring charges, comprising primarily severance, relocation and related costs,” chief financial officer Evan Levitt said on the earnings call. He added that HD Supply expects to incur $10 million to $15 million under the plan, “and expect the plan to deliver a payback in approximately two years through a reduction in ongoing costs. We expect to complete the restructuring activities in the fall of 2018.”
HD Supply, No. 42 in the B2B E-Commerce 300, also grew its product and sales territory with the acquisition of A.H. Harris Construction Supplies, which specializes in concrete construction products, for approximately $380 million in cash. The purchase closed March 5 and is expected to expand HD Supply’s Construction and Industrial physical presence on the East Coast with more than 50 new locations, particularly in the Northeast, DeAngelo said. Harris did not sell online prior to the acquisition.
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, which sells home improvement products to contractors and do-it-yourself consumers.
For the fourth quarter ended Jan. 28, HD Supply reported:
- Net sales of $1.183 billion, up 9.0% from $1.085 billion a year earlier.
- Gross profit of $468 million, up 8.6% from $431 million, resulting in a profit margin of 39.6% compared with 39.7% in the same period last year.
- Net loss of $9 million, compared with net income of $52 million. The loss was attributed to a $72 million non-cash charge for the remeasuring of the company’s U.S. deferred tax assets and liabilities resulting from the Tax Cuts and Jobs Act of 2017.
For the 2017 fiscal year ended Jan. 28, HD Supply reported:
- Net sales of $5.121 billion, up 6.3% from $4.819 billion a year earlier.
- Gross profit of $2.033 billion, up 5.6% from $1.925 billion, resulting in a profit margin of 39.7%, compared with 39.9%.
- Net income of $970 million, up from $196 million in fiscal 2016.
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