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Chicago Fed National Activity Index Decreases in February

HD Supply's Winter of Discontent

HD Supply reported 2014 and fourth-quarter revenue increases this week, but the Atlanta, GA-based company admitted that it will need a significant sales "snapback" this spring to overcome a dismal February and generally gloomy start to fiscal 2015.

"Like many other companies, the start to our fiscal 2015 year was quite challenged due to weather, causing the full or partial closure of approximately 60 branches and distribution centers in February, resulting in approximately 140 facility days being impacted," CEO Joe DeAngelo said in an earnings call with analysts.

CFO Evan Levitt said the company estimated that the weather disruption "represented an approximately 200 basis point headwind to HD Supply’s February sales growth" as it shuttered DCs for long stretches yet didn't cause enough damage to drive large repair projects that could later benefit the company.

"The weather disruption was particularly severe in that it extended deep into the southern U.S.," Levitt said. "It had a high frequency of precipitation and the most severe storms occurred during the second half of February. Weather in March continues to be challenging, and while facilities and maintenance has shown improvement, our construction-related businesses, particularly waterworks and including construction and industrial, continue to be adversely impacted."

Levitt said the company's waterworks and facilities maintenance businesses were the "most impacted by weather," with waterworks' February sales negatively impacted by approximately $10 million or 700 basis points, and facilities maintenance's February sales negatively impacted by approximately $3 million or 200 basis points."

But the company is hopeful that a snapback of business will come, especially for the Power Solutions unit, which could see pent-up demand as the weather improves throughout the country and especially in the Southeast.

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