Headwinds Continue to Short Circuit WESCO - Modern Distribution Management

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Headwinds Continue to Short Circuit WESCO

Challenging year pressures electrical distributor's top, bottom lines.
Eric-Smith-84x84
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A tumultuous year of declining revenue and departing executives continued in the third quarter for WESCO International Inc., which reported a 3.6 percent drop in sales and a loss of $31.6 million in the period, leading President and CEO John Engel to admit that "2016 has been a challenging year."

Speaking at the Baird Global Industrial Conference in Chicago, IL, last week, Engel said the company's "top line and bottom line have been pressured" by "reduced industrial demand, weak global commodity pricing, a strong dollar and FX (foreign exchange) headwinds."

WESCO's sales for the first nine months of 2016 were $5.5 billion, down 2 percent from the same period a year ago, while profit declined 66.6 percent to $54.2 million.

The Pittsburgh, PA-based company, which has seen turnover at its CFO and controller positions this year, is working to streamline its business model and has taken out "structural costs over the last six quarters," Engel said. That included closing or consolidating 30 branches.

But, he added, the company believes it is "extraordinarily well-positioned" as one of the larger distributors in the highly fragmented electrical sector to take share as customer demands continue to evolve.

"Customers are looking at consolidating their supply chains and that bodes well for us," Engel said. "We believe the big and strong players will get bigger and stronger faster. We're focused on serving our customers and playing a consolidating role in our industry."

Engel said the company, No. 2 on MDM's list of the Top 25 Electrical Distributors, will unveil its 2017 outlook next month, then added that he hopes it pans out better than 2016's outlook.

"Industrial ended up being much worse than we thought it would be," he said.

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