Posted June 10, 2020

HD Supply remains committed to business unit split

Separation of Facilities Maintenance and Construction & Industrial businesses will likely take place no later than early 2021.

by Rich Vurva

Although the economic downturn resulting from the COVID-19 pandemic delayed plans for HD Supply to separate its two business units, the company remains committed to the move.

In a conference call following release of first quarter earnings, chairman, president and CEO Joe DeAngelo said the planned separation of the Facilities Maintenance and Construction & Industrial businesses will likely take place no later than early 2021.

“We remain committed to the separation and believe we can complete it in the second half of fiscal 2020, if we continue to see the capital markets stabilize. If we are unable to execute the transaction in 2020, we look to complete it in early 2021,” DeAngelo said.

Despite a strong start early in the first quarter, sales in March were severely impacted by the various restrictions placed on economic activity. Sales in the first quarter of $1.4 billion represented a 6.6 percent year-over-year decline, with Facilities Maintenance declining 11.7 percent and Construction & Industrial declining 1.1 percent.

The company implemented a number of cost-cutting moves as a result of the revenue decline, including a hiring freeze, reduced hours in distribution centers and branch locations, and furloughing or eliminating approximately 300 employees. DeAngelo also voluntarily reduced his pay to zero for the rest of the year, and salary reductions were also instituted for all salaried associates. Independent directors waived 100 percent of their cash board retainer for the remainder of the year. Planned capital expenditures were reduced from approximately $120 million to $80 million for fiscal 2020.

HD Supply also instituted safety protocols to protect employees and customers.

“We’re providing our associates with the appropriate personal protective equipment, including disposable face mask, hand sanitizers, and gloves. We have embedded social distancing and contact barriers into our facilities and operating practices. We are screening associates for illness at the start of their day, and we execute frequent, structured, and thorough cleaning of facilities and equipment,” DeAngelo said.

John Stegeman, president of the Construction & Industrial segment, said the company limited customer interaction in showrooms and focused on technology, customer pickups and deliveries to drive business.

“During the quarter, a decision was made to also pay out additional bonus dollars to our frontline associates who interacted daily with our customers and to provide supplemental sick leave to associates impacted in any manner by the virus. We also made product donations to hospitals in need of key safety products,” he added.

DeAngelo added that he is encouraged by recent positive economic signs.

“The start of our 2020 fiscal second quarter has seen sequential improvement in average daily sales during the month of May in both businesses. We are encouraged by recent results and efforts made to slowly and prudently reopen the economy around the country,” he said.