LESCO Revises Fiscal 2006 Financial Expectations
06 Julio 2006 - 4:00PM
PR Newswire (US)
Company Reinstating Direct Sales Representatives CLEVELAND, July 6
/PRNewswire-FirstCall/ -- LESCO, Inc. (NASDAQ:LSCO), a leading
provider of products for the professional green and pest control
industries, today announced that it has revised its expectations
for financial results for the fiscal year ending December 31, 2006,
and has initiated efforts to reinstate the direct sales
representative model that was disbanded in the first quarter of
2005. Currently, the Company anticipates net revenue growth of 5%
to 6% for its Stores Segment while net revenue for its Direct
Segment is anticipated to decline 34% to 35%. The Company
previously estimated a full-year increase of 10% to 12% in the
Stores Segment and a decline of 14% to 15% in the Direct Segment.
Based on these revised revenue estimates and the related
de-leveraging of gross profit, LESCO expects to incur a net loss on
a consolidated basis of approximately $4 million for the full year
2006. The lower-than-anticipated net revenues are primarily
attributable to the loss of sales to customers who were previously
supported by a direct sales representative. During planning for
2006, the Company expected the 2005 decision to disband the sales
representative model would result in the loss of certain business
in the Direct Segment; however, the Company did not anticipate
losing sales from these customers in its LESCO Service Center(R)
locations and Stores-on-Wheels(R) vehicles. Additionally, as
previously disclosed, sales have lagged expectations in the
Company's ice melt and equipment categories, which has contributed
to the decline in net revenues and gross profit dollars. Jeffrey
Rutherford, President and Chief Executive Officer stated, "The
decision to disband the sales representative program did not
adequately take into consideration our customers' needs. I have
spent considerable time talking to current and former LESCO
customers, and many have taken business elsewhere because they lost
their relationship with LESCO's sales representatives. Today's
announcement reflects our commitment to customers." The new sales
representative organization will resemble the model disbanded in
2005, but key changes will strengthen the overall effort. The sales
representatives and national account teams will be led by Steve
Vincent, Channel Vice President, Golf Sales, and Paul McDonough,
Channel Vice President, Lawn & Landscape Sales, both of whom
were promoted to these newly- created positions. Messrs. Vincent
and McDonough will report directly to Richard Doggett, Senior Vice
President, Sales. Mr. Vincent and Mr. McDonough will provide
leadership specific to their respective customer channels and work
with the Zone Vice Presidents, who lead LESCO's Service Center and
Stores-on-Wheels teams. Mr. Doggett stated, "We are very fortunate
to have the loyalty and leadership of these highly regarded
industry veterans. I am confident that Steve and Paul's extensive
experience will allow them to lead our sales representatives with a
renewed customer focus that will support revenue and gross profit
expansion across the organization." In addition to the revised
revenue estimates, the Company expects a 340- basis-point decline
in its Stores Segment gross profit percentage for 2006 versus 2005.
Previous guidance anticipated an approximate 200-basis-point
decline, an effect of the sale of the Company's supply chain assets
to Turf Care Supply Corp. in the fourth quarter of 2005. The
additional decline is driven by lower-than-expected sales,
resulting in a de-leveraging effect to supply chain agreements from
both direct and indirect suppliers. Mr. Rutherford stated, "In our
model, we create value by leveraging the fixed costs associated
with our Service Centers and Stores-on-Wheels through the continued
growth of gross profit dollars. The decision to eliminate the sales
representatives in 2005 resulted in lost gross profit dollars,
which de- leveraged our store model. We recognize this and are now
taking steps to remedy it." Mr. Rutherford concluded, "Our newer
Service Centers, which include the classes of 2004, 2005 and 2006,
continue to perform at or beyond our expectations, demonstrating
the strength and resilience of our store model. Re-investing in
sales representatives will result in expanded revenues and gross
profit dollars and should leverage the fixed costs of our
Stores-on- Wheels and approximately 1.8 million square feet in
Service Centers." Revised 2006 Guidance We currently anticipate the
following financial results for 2006: - Stores Segment - Net
revenue growth of 5.0% to 6.0% - Gross profit rate (including
distribution costs) of 24.0% to 24.4% - Direct Segment - Net
revenue declining 34.0% to 35.0% - Gross profit rate (including
distribution costs) of 17.0% to 18.0% - Consolidated - Selling,
Corporate and Merchant Discount expenses are in line with previous
guidance - Net loss, including a tax benefit of 39%, of
approximately $4 million Biographies Rich Doggett was promoted to
Senior Vice President, Sales in May 2006 after spending two years
as a Zone Vice President for LESCO's Central Zone. Doggett, who has
a Bachelor's degree from Harvard University and a Master's in
Business Administration from the University of North Carolina,
joined LESCO after spending eight years at Cintas Corp., where he
was most recently Director of Catalog Sales. While at Cintas,
Doggett acquired extensive sales leadership, P&L management and
marketing expertise. Rich also held other senior-level marketing
and sales positions at Cintas and was a black belt in Cintas' Six
Sigma Initiative. Steve Vincent joined LESCO in a new Service
Center in 1987. He subsequently operated a Stores-on-Wheels vehicle
for five years before being promoted to Regional Manager. Vincent,
with a Bachelor's of Science degree from Missouri State University,
was then promoted to Director of Golf, a position he held for eight
years before returning to his current role as a regional manager.
Vincent is actively involved in industry trade associations,
including holding positions on the board of directors of the Heart
of America Superintendents Association (a chapter of the Golf
Course Superintendents Association of America) and Common Ground.
Paul McDonough has served in various sales leadership roles at
LESCO since 1995, including Vice President, National Accounts, and
National Accounts Manager. He has more than 30 years of experience
in the lawn care and landscape industry, having worked for a number
of leading lawn care companies as well as industry suppliers.
McDonough also has a clear commitment to the industry, having
served as president of organizations such as Project Evergreen, the
Environmental Industry Council of Connecticut, and Ohio
Professional Applicators for Responsible Regulation. Conference
Call The Company will host a conference call and audio webcast with
investors, analysts and other interested parties tomorrow morning
at 8:00 a.m. (Eastern). Hosting the call will be Jeffrey
Rutherford, President and Chief Executive Officer. The live call
can be accessed by dialing 866-277-1184, passcode 95202961.
Participants should register at least 15 minutes prior to the
commencement of the call. The conference call will also include a
question and answer session related to today's announcement.
Additionally, a live audio webcast will be available to interested
parties at http://www.lesco.com/. Participants should allow at
least 15 minutes prior to the commencement of the call to register,
download and install necessary audio software. Questions can be
submitted either in advance or during the webcast via email to or
through the Company's corporate website where a link will be
provided on the "Home" page. LESCO's culture demands the highest of
ethical standards and accountability manifested in full and fair
financial disclosure to our shareholders. LESCO management
encourages the participation of our shareholders and other
interested parties in our conference calls and live webcasts. For
those who cannot participate in the conference call or the live
webcast, a replay will be available beginning approximately one
hour after the conclusion of the event on LESCO's website. About
LESCO, Inc. LESCO currently serves more than 130,000 customers
worldwide, through approximately 320 LESCO Service Center
locations, 114 LESCO Stores-on-Wheels vehicles, the Internet, and
other direct sales efforts. Additional information about LESCO can
be found on the Internet at http://www.lesco.com/. Statements in
this news release relating to sales and earnings expectations, new
Service Center openings and profitability, and other statements
that are not historical information are forward-looking statements
and, as such, reflect only the Company's best assessment at this
time. Investors are cautioned that forward-looking statements
involve risks and uncertainties that may cause actual results to
differ materially from such statements and investors should not
place undue reliance on such statements. Factors that may cause
actual results to differ materially from those projected or implied
in the forward-looking statements include, but are not limited to,
the final resolution of certain contingencies relative to the
collection of identified accounts receivable; the Company's ability
to add new Service Centers in accordance with its plans, which can
be affected by local zoning and other governmental regulations and
its ability to find favorable store locations, to negotiate
favorable leases, to hire qualified individuals to operate the
Service Centers, and to integrate new Service Centers into the
Company's systems; the Company's ability to attract quickly and
retain direct sales representatives who are respected in the
industry and engender customer loyalty; the Company's ability to
satisfy minimum purchase requirements for branded equipment;
competitive factors in the Company's business, including pricing
pressures; lack of availability or instability in the cost of raw
materials which affects the costs of certain products; the
successful and uninterrupted performance of supply chain services
by Turf Care Supply Corp; the Company's ability to impose price
increases on customers without a significant loss in revenues;
potential rate increases by third-party carriers which affect the
cost of delivery of products; changes in existing law; the
Company's ability to effectively market and distribute new
products; the success of the Company's operating plans; any
litigation or regulatory proceedings against the Company; regional
weather conditions; and the condition of the industry and the
economy. For a further discussion of risk factors, investors should
refer to the Company's Securities and Exchange Commission reports,
including but not limited to its Form 10-K for the year ended
December 31, 2005. Contact: Jeffrey Rutherford Chief Executive
Officer LESCO, Inc. (216) 706-9250 DATASOURCE: LESCO, Inc. CONTACT:
Jeffrey Rutherford, Chief Executive Officer of LESCO, Inc.,
+1-216-706-9250 Web site: http://www.lesco.com/
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