Wesco net sales decline 4.6%
Wesco International, a provider of business-to-business distribution, logistics services, and supply chain solutions, announced its second quarter net sales were down 4.6% YOY. Gross margin of 21.9%, up 30 basis points YOY.
Divestiture of Wesco Integrated Supply (WIS) was completed on April 1. The company's operating cash flow was $523 million for the first six months of 2024.
"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," said Chairman, President and CEO John Engel "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. While we remain confident in the long-term growth of our Utility and Broadband Solutions business, the customer destocking and delay of capital projects clearly impacted our results in the quarter.
"As planned, we executed our capital allocation strategies and repurchased $300 million of our Wesco stock in the second quarter and closed on two small but important software-based acquisitions, entroCim and Storeroom Logix," he added. "With our record $500 million of free cash flow generation in the first half, we are on track to deliver our full year free cash flow outlook of $800 million to $1 billion and will continue to execute our capital allocation strategies.
"We expect the mixed economic environment and customer purchasing delays in utility and broadband to continue through the second half of 2024," Engel continued. "Quoting, bid activity levels, and our backlog remain healthy, supporting our view for sales growth in the second half against an easier year-over-year comparable, but at a more modest rate than our previous outlook. As a result, we are reducing our full-year outlook and now expect organic sales growth of (1.5)% to 0.5% versus prior year and adjusted EBITDA margin of 7.0% to 7.3%. We plan to build on our improving sequential momentum in the second half as we continue to benefit from our global capabilities, leading scale and expanded portfolio."
For the three months ended June 30, compared to the same period of 2023, net sales were $5.5 billion versus to $5.7 billion, a decrease of 4.6%. On an organic basis, which removes the impact of the WIS divestiture and differences in foreign exchange rates, sales for the second quarter of 2024 declined by 0.8%. The decrease in organic sales reflects volume declines in the EES and UBS segments, partially offset by a volume increase in the CSS segment and price inflation in the EES and UBS segments.
Backlog at the end of the second quarter of 2024 declined by 10% compared to the end of the second quarter of 2023. Sequentially, backlog declined by approximately 2% in the quarter.
Cost of goods sold for the second quarter of 2024 was $4.3 billion compared to $4.5 billion for the second quarter of 2023, and gross profit was $1.2 billion for the second quarter of 2024 and 2023. As a percentage of net sales, gross profit was 21.9% and 21.6% for the second quarter of 2024 and 2023, respectively. The increase in gross profit as a percentage of net sales for the second quarter of 2024 primarily reflects the impact of the divestiture of the WIS business. Sequentially, gross profit as a percentage of net sales increased 60 basis points from 21.3% in the first quarter of 2024.
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