Residential market is “challenged,” says Ferguson CEO

Ferguson’s U.S. residential sales declined by one percent year-over-year in Q1, with residential plumbing revenue, in particular, sliding by two percent, the company reported last week. 

What’s happening: “The residential end market, representing approximately half of revenue, remained challenged,” CEO Kevin Murphy said on the company’s earnings call. 

• “New residential construction activity remained weak, and repair, maintenance, and improvement work also remained soft,” he added. 
• Housing starts are weaker than last year, and PVC pipe, copper, and fuel costs are up, Ferguson noted. 

What they’re saying: CFO Bill Brundage described “a variety of factors that are pressuring the residential environment, not the least of which is mortgage rates that still remain high, uncertainty around oil prices and fuel costs for the consumer, and pressured balance sheets.” 

• Still, “we are really pleased with the 31 percent gross margin in the first quarter,” he said, adding that the company’s teams “are executing really well.” 

Yes, but: “We remain cautious about the residential sector’s challenges,” Murphy said.  

What we’re watching: Ferguson expects its markets to be “broadly flat for the year,” split by “residential down low to mid-single digits and non-residential up low to mid-single digits,” according to Brundage.