Lesco Inc. of Cleveland, Ohio, said on July 6 that it has revised its expectations for financial results for the fiscal year ending Dec. 31, 2006, and planned to reinstate direct sales representatives to 20 to 30 of its major markets. The direct sales representative model was disbanded in the first quarter 2005. Company spokesman Bob West told Green Markets this will likely mean that 20 or 30 full-time sales representatives will be added to the company. He expects that at least half of these positions will go to former employees, and the other half to new hires. Inquiries should go to Richard Doggett, senior vice president, sales.
Lesco now anticipates net revenue growth of 5-6 percent for its Stores segment, while net revenue for its Direct segment is anticipated to decline 34-35 percent. Lesco previously estimated a full-year increase of 10-12 percent for Stores and a decline of 14-15 percent for Direct. Based on these revisions, Lesco will 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® locations and Stores-on-Wheels® 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. In addition to the revised revenue estimates, Lesco expects a 340 basis-point decline in its Stores 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.
“The decision to disband the sales representative program did not adequately take into consideration our customers’ needs,” said Jeffrey Rutherford, Lesco president and CEO. “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.”
Lesco said 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. Vincent and McDonough will report directly to Richard Doggett, senior vice president, sales. Vincent and 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.
In other Lesco personnel news, Bob West, formerly director of marketing, was recently named director of communications and industry affairs. Chris Paczak was promoted to associate vice president, marketing and pricing, and is now managing Lesco’s marketing/advertising efforts. Brian Rowan was promoted to associate vice president, merchandising. Bob Fischer was promoted to associate vice president, customer service and inventory management.