Wesco 1Q Sales, Margins Dip Against Tough Comps - Modern Distribution Management

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Wesco 1Q Sales, Margins Dip Against Tough Comps

The company noted that volume declined year-over-year in all three of its business segments.
Wesco 3

Electrical supplies distributor Wesco reported its 2024 first quarter financial results on May 2, which showed continued modest declines in year-over-year organic sales and margins against what the company said was its toughest comparison of the year.

The Pittsburgh-based company posted total 1Q sales of $5.4 billion, down 3.1% year-over-year, with organic sales down 3.2%. Wesco said the organic slide reflects volume declines in all three of its business segments, partially offset by price inflation. Sequentially, those were larger declines than 4Q23’s 1.5% overall dip and 2.6% organic dip.

For context, Wesco’s 1Q23 saw sales jump approximately 12% year-over-year during a period of escalating inflation across the industry.

Wesco’s backlog at the end of 1Q was down 10% year-over-year, and up 1% fro the end of 4Q23.

The company’s 1Q gross margin of 21.3% was down 60 basis points year-over-year and down 10 points from 4Q23. Meanwhile, 1Q operating profit of $263 million fell 24.1% year-over-year and trailed 4Q23’s $316 million, while operating margin of 4.9% was down 140 bps year-over-year and down 90 bps from 4Q23.

Wesco posted a 1Q net profit of $116 million was down 41.1% year-over-year and trailed 4Q’s $128 million. Adjusted EBITDA margin of 6.4% was down 120 bps year-over-year and down 60 bps from 4Q23.

“Our first quarter sales met our expectations and were consistent with the outlook we provided during the quarter,” Wesco Chairman, President and CEO John Engel said in the company’s financials release. “Our performance, compared against the strong first quarter a year ago, was in line with our typical seasonal pattern and our full year outlook. Quoting, bid activity levels, and our backlog remain healthy and support our view for sequential growth as the year progresses.”

PREMIUM: Wesco Targets Operating Margin Improvement with Anixter-Era Plan (November 2023)

By Wesco business unit in 1Q:

  • Electrical & Electronic Solutions (EES) sales of $2.10 billion fell 2% year-over-year, with organic sales down by that same amount. Adjusted EBITDA fell 9% year-over-year.
  • Communications & Security Solutions (CSS) sales of $1.67 billion fell 4% year-over-year, with organic sales down by that same amount. Adjusted EBITDA fell 18% year-over-year.
  • Utility & Broadband Solutions (UBS) sales of $1.58 billion fell 5% year-over-year, with organic sales down by that same amount. Adjusted EBITDA fell 10% year-over-year.

Other notes from Wesco’s 1Q financial presentation:

  • On April 1, Wesco completed the divestment of its MRO supplies unit — Wesco Integrated Supply (WIS) — to Vallen Distribution, for which Vallen paid $350 million. Wesco said it will use $300 million of the proceeds on share repurchases in 2Q.
  • Updating its 2024 full-year outlook, Wesco now expects total organic sales growth of flat to 3% ($21.9-$22.6 billion, identical to its 4Q23 report. The WIS divestiture is expected to have a -3% ($700 million) impact on full-year sales. The company forecasts full-year adjusted EBITDA margin of 7.5%-7.9%.
  • Wesco noted that after a down January, sales rebounded in February with another sequential increase in March.
  • Wesco said it completed $20 million of annualized structural cost reductions in late 1Q.

Wesco posted 2023 total sales of $22 billion.

On April 29, Wesco shared its new 5-year partnership with Flintfox International, which will provide centralized pricing for the distributor.

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