Weather, commodity prices and tough year-over-year comparisons for the first quarter created a challenging environment for Atlanta, GA-based HD Supply. But the diversified distributor still managed to post revenue growth of 7 percent in the quarter.
The company also saw improvement in gross profit (up 8.9 percent) and gross margin (50 basis points) over the same period a year ago.
"The improvement is primarily result of our category management execution and favorable product and services mix, partially offset by a continued challenging uncontrollable environment," CFO Evan Levitt said in a call to discuss the first quarter results.
Structurally, a lot of focus is on the facilities maintenance business. Earlier it was announced that management of that line would be moved from San Diego, CA, to corporate headquarters in Atlanta. President and CEO Joe DeAngelo took over direct management of the division last year after the departure of Anesa Chaibi.
It's also the division that was most affected by cooler than normal weather in April and May, leading to lower demand for HVAC products and offsetting the positive impact of warmer weather in February, Levitt said. The company has made adjustments, but the headwinds are expected to ease in the second quarter as demand normalizes.
"We have a massive market opportunity and continuously refine our execution as we learn from and translate this performance," DeAngelo said.
Over the past four years ago, the company has shed several of its divisions, large and small. Before 2012, the distributor was focused on five "core leadership lines of business." Today, HD Supply is made up of three core lines – facilities maintenance, waterworks and White Cap – after selling its industrial pipes, valves and fittings business to Shale-Inland Holdings in 2012 and its Power Solutions business to Anixter in 2015.
In addition, HD Supply sold its Crown Bolt division to The Home Depot in 2014 and its interior solutions unit to Interior Specialists Inc. And it rolled up its home improvement solutions under the leadership of its construction and industrial team.
"We’re down to the three (business units) we intended to be with," DeAngelo said about the string of sell-offs. And the roll-up of home improvement into construction and industrial "allowed us to finally finalize our portfolio restructuring so we have the portfolio right now and we can just execute going forward flat out."