Building supplier cuts back

Housing slump is pounding Stock, which has 1,100 workers in the Triangle

RALEIGH -- Stock Building Supply is slashing 3,000 jobs and closing 86 facilities in six states as it struggles with the biggest housing slump in more than six decades.

The Raleigh company's British parent, Wolseley Plc, made the announcement Thursday following a month-long examination of how to unload -- or whether to shutter -- Stock, which is losing money.

"These are very painful decisions that affect loyal associates and their families," Stock president Joe Appelmann said in a prepared statement. "Without a doubt, we are facing unprecedented times in our industry."

Indeed, the housing slowdown has forced other building suppliers to scale back -- even in places such as the Triangle, which has avoided the worst of the nation's housing bust.

On Monday, North Brunswick, N.J.-based Silver Line Building Products, a major supplier of windows to builders and retailers, said it would close a Durham plant and begin laying off 428 employees five days before Christmas.

Stock has about 11,700 employees nationwide. That includes 1,100 in the Triangle -- where it grew from selling boards and other products on a Dawson Street lot 86 years ago to become the nation's biggest supplier of building materials to contractors.

Denise Waters, a Wolseley spokeswoman, declined to say how many jobs would be cut in this region. "We're anticipating minimal disruptions in the Triangle and Charlotte," she said.

The cuts, to happen by February, could have been far deeper -- and may still be.

The company, which sells and installs housing products such as roofs, windows, wall panels, decks, cabinets and insulation, generates more than 70 percent of its revenue from the residential construction industry. It has struggled as the mortgage industry has unraveled. U.S. housing starts have dropped by almost two-thirds since January 2006.

The division lost $246 million during the 2008 fiscal that year ended July 31. That compared to $86 million in profit during the previous year.

The prospect of selling Stock was virtually impossible for Wolseley, given a global credit crunch that is limiting buyers. So it opted to restructure rather than close the company -- a strong consideration, and one that was championed by some analysts.

The cuts are expected to reduce annual losses at Stock by $100 million. Wolseley expects Stock will lose up to $200 million this year.

Analysts question whether the cuts were enough. "A $200 million loss is still a lot," Howard Seymour, a Numis Securities analyst, told Wolseley executives Thursday during a conference call.

Stock likely won't break even until 2011 at the earliest, Imran Akram, a Collins Stewart analyst, wrote in a report. "Selling Stock -- even for a dollar -- would have [improved Wolseley's earnings per share] as its losses were removed," he wrote.

But keeping the division afloat in markets where it is among the top players will pay off when the housing market recovers, Wolseley executives said.

Stock will leave Louisiana, where it is not the leading supplier of building materials. But it will stay in Texas, Utah and the Carolinas. It also will remain in Florida and California, "even though they're two of our bloodiest markets," Wolseley CEO Chip Hornsby told analysts.

"We're confident those markets will come back," Hornsby said. "We still want to be certain we have a strong enough footprint there to participate in the upswing."

Because of its size, Stock may be better positioned to outlast smaller competitors.

The focus for now, Hornsby said, is to retain, or perhaps take, top position "as the market conditions, and the stress on our competitors even, becomes more steep."

Stock, which was founded in Raleigh in 1922 as Carolina Builders, was acquired by Wolseley in 1986. The company has grown largely by buying competitors across the country. Stock has about 60 North Carolina branches.

The cuts will leave Stock with 209 branches in 27 states. It will have 8,700 employees, down 55 percent from the peak in 2006.

Wolseley said it eventually would release more detailed information about where it will close Stock branches.

"The board will keep an open mind on any future options," Hornsby added.

That could mean more cuts, but further action will depend on how quickly Stock's markets recover, Stephen Webster, Wolseley's chief financial officer, told analysts.

"If we have to do any more," he said, "we'll at least have the further knowledge as to how all those individual markets are behaving ... to decide how much more of a layer to peel away."