Rexel Reports
And like they say “c’est la vie” (or, according to a definition on Urban Dictionary, “Oh well, h_t happens).
While the company can spin its third quarter worldwide performance, we’re only focused here in the States. Some observations:
- Q2 was down 34.8%, which is worse than the industry average. While certain geographic areas are near / worse than this (West Coast, Florida, Michigan?), the overall market hasn’t been this bad, it appears that Rexel is losing market share. And we hear that Graybar and WESCO were down 25-28%. Independents vary based upon market focus and geographic area – we’ve heard numbers from -10% to -32%.
- Rexel places the blame on the residential market, which has been hurting for awhile and will not be a business driver longer-term. In fact, in the its heyday, resi was only 10-15% of the market! Sounds like the issue is much more.
- Branch closings have represented “only” 4.5% of sales. For a company whose combined (Rexel and Gexpro) 2008 U.S. revenues were reported to be $6.469 billon in Electrical Wholesaling’s top 200, this could represent $291.1 million. If the Rexel group was only half of this revenue, that is still $150 million in branch closings! This does not count the decline from the vast number of salespeople who have left Rexel.
- According to the quarterly report, “In the coming months, market trends will remain challenging in all of Rexel’s end-markets. Nevertheless, Rexel is confident that profitability in the fourth quarter will continue to improve sequentially, as was achieved since the beginning of this year, thanks to the acceleration of its cost reduction programme.” So essentially, expect more of the same as a way to achieve net profitability and wait for the market to generate growth. This should be good news for competing distributors (lack of investment) albeit Rexel will probably try to buy business (good luck on servicing the business). For manufacturers, what does this mean for “support”?
Manufacturers have expressed concern about Rexel. Not that the company has financial challenges, but the direction of the company. They see closings, personnel leaving (voluntarily and involuntarily) and don’t sense the company has plans to create demand. Essentially they look at the company as a transactionally-oriented distributor, not a growth engine that they can partner with.
Distributors are finding that Rexel has servicing issues, low morale and is willing to “take any piece of business” (read low margin / no margin business). With Rexel in apparent disarray, independent distributors may begin targeting personnel and accounts.
And the company is going through an ERP transition!!
Perhaps the moral of the story is that if you make acquisitions, integrate them. Additionally, continually develop your culture and stay focused.
A company with a few challenges! What are you seeing in your market? If you are a manufacturer, what would you like to see from Rexel?