Global plumbing and HVAC supplies distributor Ferguson reported its fiscal 2023 second-quarter results March 7, showing a deceleration in sales growth compared to its fiscal 2023 first quarter.
In its fiscal 2Q, which ended Jan. 31, 2023, Ferguson posted net sales of $6.8 billion, a 4.9% increase compared to the same quarter in 2022. Organic revenue growth was 2.7% in 2Q, with a further 2.6% contribution from acquisitions, partially offset by a 0.3% adverse impact from foreign exchange rates, according to the report. Gross margin of 30.2% was down 40 basis points year-over-year.
Ferguson’s 2Q sales were down sequentially from 1Q 2023, when the company had sales of $7.9 billion (16.6% increase over 1Q 2022). The decline was expected, according to the report.
The company’s U.S. business grew net sales by 5.4% in 2Q, driven by 2.6% organic growth with a further 2.8% from acquisitions, the report said. This follows 17.4% sales growth for Ferguson’s U.S. business in 1Q.
Ferguson reported year-over-year 2Q revenue growth in each of the following U.S. end markets:
- Residential: 1% revenue growth (54% of total U.S. revenue)
- Non-residential: 11% revenue growth (46% of U.S. revenue)
- Commercial: 9% revenue growth (32% of U.S. revenue)
- Civil/Infrastructure: 7% revenue growth (8% of U.S. revenue)
- Industrial: 24% revenue growth (6% of U.S. revenue)
The company also reported year-over-year 2Q sales changes for the following U.S. customer groups:
- Residential Trade: -5% (19% of total U.S. sales)
- Residential Building and Remodel: 12% (14% of U.S. sales)
- Residential Digital Commerce: -10% (9% of U.S. sales)
- HVAC: 10% (11% of U.S. sales)
- Waterworks: 6% (21% of U.S. sales)
- Commercial/Mechanical: 8% (13% of U.S. sales)
- Fire and Fabrication, Facilities Supply and Industrial: 17% (13% of U.S. sales)
Ferguson’s Canada business declined 4.5% in 2Q, with organic revenue growth of 3%, offset by 1.2% due to one fewer sales day, and a further 6.3% due to the adverse impact of foreign exchange rates, according to the report. The decline comes after the company’s Canada business grew by 3.6% in 1Q.
“The year is unfolding as we expected and our associates continue to deliver solid results by leveraging our scale and core strengths to help our customers deliver their complex projects,” Ferguson CEO Kevin Murphy said in the report. “We continue to appropriately manage costs to position the business for challenging end markets. Importantly, working capital management led to strong cash generation which enables us to continue investing for organic growth, consolidating our fragmented markets through acquisitions and returning capital to shareholders.
“Looking forward, our balanced exposure to both residential and non-residential end markets, combined with an agile business model, positions us well for near term uncertainties. Our financial guidance continues to reflect market outperformance, both organically and from acquisitions, and we believe our scale and advantaged platform position us to capture growth from emerging structural trends in our end markets.”
Ferguson ranked as the No. 1 Plumbing Distributor, No. 2 HVACR Distributor, No. 2 Industrial PVF Distributor and No. 4 Industrial Distributor on MDM’s 2022 Top Distributors list.