Electrical supplies distributor Wesco reported its second quarter financial results on Aug. 1, which showed continued modest declines in year-over-year sales, but results improved in June with sequential margin expansion.
The Pittsburgh-based company posted total 2Q sales of $5.5 billion, down 4.6% year-over-year, with organic sales down 0.8%. Wesco said the organic sales decline reflects volume declines in its EES and UBS segments, partially offset by a volume increase in CSS segment and price inflation in the EES and UBS segments.
Wesco’s backlog at the end of 2Q was down 10% year-over-year and declined by approximately 2% from the end of 1Q24.
The company’s 2Q gross margin of 21.9% was up 30 basis points year-over-year and up 60 bps from 1Q24. Meanwhile, 2Q operating profit of $324 million fell 11.1% year-over-year as operating margin of 7.3% was down 40 bps year-over-year and up 90 bps sequentially.
“Our second quarter results were somewhat below our expectations for a low single-digit decline in reported sales against a continued mixed and multi-speed economic environment,” Wesco Chairman, President and CEO John Engel said in the company’s financial release. “Results improved as we moved through the quarter with a return to organic sales growth in June along with sequential margin expansion. We continued to benefit from the increase in AI-driven data center growth with sales in our Wesco Data Center Solutions business up double-digits. This was more than offset by a significant slowdown in purchases by our utility customers.”
Engel — who will be featured at MDM’s upcoming SHIFT Conference in a Fireside Chat on Sept. 13 — added that while Wesco remains confident in the long-term growth of its Utility and Broadband Solutions business, the customer destocking and delay of capital projects clearly impacted the company’s 2Q results.
See our new three-part Wesco Analysis series on MDM Premium:
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- Part 1: Scale and Value Proposition
- Part 2: Enterprise Strategies
- Part 3: Digitize the Business
- Stay tuned for the release our Case Study report that packages insights from that series and much more, to be available in the MDM Store
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By Wesco business unit in 2Q:
- Electrical & Electronic Solution (EES) sales of 2.2 billion fell 1.2% year-over-year, with organic sales down by 0.6%. Adjusted EBITDA rose 9% year-over-year.
- Communications & Security Solutions (CSS) sales of 1.9 billion increased 0.8% year-over-year, with organic sales up by 1.1%. Adjusted EBITDA rose 8.1% year-over-year.
- Utility & Broadband Solutions (UBS) sales of 1.4 billion decreased 15% year-over-year, with organic sales down by 0.8%. Adjusted EBITDA rose 12% year-over-year.
Other notes from Wesco’s 2Q financial presentation:
- Wesco executed its capital allocation strategies and repurchased $300 million of its Wesco stock in the second quarter. The company closed on two software-based acquisitions — entroCim and Storeroom Logix.
- Updating its 2024 full-year outlook, Wesco expects total organic growth of -1.5% to 0.5% ($21.6 to $22.6 billion). The Integrated Supply Divestiture is expected to have a -3% impact on full-year sales. The company forecasts full-year adjusted EBITDA margin of 7%-7.3%.
Wesco — No. 1 on MDM’s Top Distributor’s List for Electrical, Data and Security Supplies — posted $22.4 billion in revenue sales for 2023.
The post Wesco Sales Declines Continue in 2Q on Utility Slowdown appeared first on Modern Distribution Management.