Plumbing, HVACR and industrial supplies distribution giant Ferguson reported its 2024 second quarter financial results on March 5, showing a modest year-over-year sales decline in the November-January period against a strong 2023 comparable.

The company posted total 2Q sales of $6.7 billion that were down 2.2% year-over-year, with organic revenue down 3.7% — driven by a decline in residential sales and a smaller dip in non-residential sales, partially offset by a 1.5% contribution from acquisitions. Meanwhile, Ferguson said expected weakness in certain commodity-related categories drove modest overall price deflation of about 2%.

The overall year-over-year sales change was an improvement from 1Q’s 2.8% decline (-4.9 organic). 

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Ferguson’s 2Q gross margin of 30.4% was up 20 basis points year-over-year and its operating profit of $477 million (on 7.1% margin) was down 13.1% year-over-year, with an adjusted operating profit of $520 million (on 7.8% margin) down 10.7%. 2Q adjusted EBITDA of $568 million fell 9.8%, and net profit of $322 million fell 13.9%.

“While sales were slightly lower than the prior year, organic performance improved from the first quarter,” Ferguson CEO Kevin Murphy said in the company’s 2Q financial statement. “Current open orders and sales per day trends support our expectation of improvement through the balance of the fiscal year against easing comparables. We are appropriately managing costs as we prepare for our seasonally stronger second half.”

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By Ferguson business geography in 2Q:

• United States sales of $6.36 billion (95.4% of total) fell 2.2% year-over-year, with organic revenue down 3.7%. Adjusted operating profit of $525 million fell 9.3%.
  • Ferguson noted that residential end markets — which comprise just over half of its U.S. revenue — remained subdued during 2Q. New residential housing start and permit activity improved slightly in the quarter, while repair, maintenance and improvement (“RMI”) work remained soft. Overall, residential revenue declined by approximately 4% in the second quarter.
  • Non-residential end markets — representing just under half of Ferguson’s U.S. revenue — showed comparative resilience with non-residential revenues declining by approximately 1% in the second quarter. Commercial and civil/infrastructure activity held flat in the quarter with industrial more pressured against a strong prior year comparable. “We continued to see good levels of megaproject-related bid activity,” the company noted.
  • Ferguson completed two U.S. acquisitions during 2Q: Grove Supply, Inc., a 17-location plumbing and HVAC distributor serving customers in Pennsylvania and New Jersey, and Harway Appliances, a premier distributor of high-end kitchen appliances in Texas.
• Canada sales of $309 million fell 3.7%, with organic revenue down 3.3%. Adjusted operating profit of $9 million fell 35.7%.
  • Prior to the quarter, Ferguson acquired Yorkwest Plumbing Supply, a distributor of plumbing, municipal, hydronics, institutional, HVAC and industrial products in the greater Toronto area.

‘Domiciling’ Ferguson’s Ultimate Parent Company in the U.S.

On Jan. 18, Ferguson’s Board of Directors announced that the company would pursue establishing and moving its corporate structure to the United States from its current Wokingham, England base. The step would better align the company’s headquarters and governance with its operation and leadership, said Ferguson. 

The new corporate structure would be actioned through a merger process by which Ferguson would become a direct wholly-owned subsidiary of a new Delaware corporation — US TopCo. US TopCo would list its common stock on both the New York Stock Exchange (primary) and London Stock Exchange (secondary). 

Ferguson said it expects the change to be effective on or about Aug. 1, 2024, subject to the satisfaction of the conditions to the completion of the transaction, including shareholder approval.

The pending move follows a nearly decade-long transition for Ferguson to re-base its corporate identity in the U.S., which began in earnest in July 2017 when Wolseley plc — then the company’s parent name — rebranded as Ferguson plc to reflect the most significant brand in its portfolio.