Why This Matters to Distributors: SiteOne is reducing staff and adjusting its branch network as weak construction and renovation demand weighs on sales volume, even as acquisitions and higher prices support revenue growth.
SiteOne Landscape Supply plans to cut jobs and consolidate or close branches in the fourth quarter as weak residential construction and renovation demand continues to pressure its business.
The Roswell, Georgia-based distributor announced the plans Oct. 28 alongside third-quarter results showing higher sales and earnings but lower daily sales excluding recent acquisitions. The company did not disclose how many employees or branches would be affected or identify the locations.
“We are managing SG&A tightly and making the necessary changes to optimize our cost structure,” Chairman and CEO Doug Black said, referring to selling, general and administrative expenses.
SiteOne expects the workforce reductions and branch changes to result in fourth-quarter charges of approximately $6 million to $8 million. The company cited lower sales volume and higher fuel and health care costs as pressures on its operations.
Third-quarter sales increased 2.6% to $1.29 billion from $1.26 billion a year earlier. Net income attributable to SiteOne rose 8.1% to $63.9 million from $59.1 million for the quarter ended Sept. 27.
For the first nine months, sales increased 2.8% to $3.76 billion from $3.66 billion. Net income attributable to SiteOne rose 9.8% to $176.6 million from $160.8 million.
Acquisitions contributed $39.7 million to third-quarter sales growth, exceeding the company’s overall increase of $32.9 million. Organic daily sales, which exclude recent acquisitions and adjust for selling days, declined 1%.
SiteOne said lower volume and delayed fall applications more than offset higher prices. Hot, dry weather in August and September pushed back seasonal demand in key markets.
“Our end markets continue to be challenging with declines in new residential construction and repair and upgrade more than offsetting the more resilient maintenance and new commercial construction end markets,” Black said.
Prices increased approximately 4% during the quarter, a trend SiteOne expects to continue through year-end. Organic daily sales were increasing approximately 2% in October, partially recovering business delayed by the weather.
The company expects organic daily sales to be flat to up 1% for July through October. For the full year, it projects those sales will be flat to down 1%, reflecting continued market weakness and an extra fiscal week in December.
The additional week falls during a seasonally slow period and is expected to reduce the full-year organic daily sales growth rate by approximately 0.8 percentage points. SiteOne expects weak demand to persist amid economic uncertainty, high interest rates and inflation.
Despite lower volume, third-quarter gross profit increased 4.9% to $458.5 million. Gross profit as a share of sales rose to 35.5% from 34.7%, primarily because of pricing, fuel surcharges and the company’s commercial initiatives.
Selling, general and administrative expenses increased 3.2% to $368.7 million, or 28.6% of sales, compared with 28.4% a year earlier. Higher fuel and health care costs and lower sales volume partly offset operating improvements and cost controls.
SiteOne continued its acquisition program during the quarter with the purchase of Patterson Nursery Sales. Black said the company has “a very active pipeline of potential deals” as it pursues opportunities to gain market share and improve productivity.
After the quarter ended, SiteOne’s board increased its share repurchase authorization by $500 million, bringing the available total to approximately $538.3 million. The company repurchased $62.2 million in shares during the third quarter.
Black said SiteOne would balance repurchases with investment in its existing operations and acquisitions. The company ended the quarter with $88.4 million in cash and $478 million available under its asset-based credit facility.
SiteOne distributes landscape supplies to residential and commercial professionals in the United States and Canada. Its customers design, install and maintain lawns, gardens, golf courses and other outdoor spaces.
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