What next for Wolseley?

I have been wounded, but not yet slain, I shall lie here and bleed awhile. Then I shall rise and fight again

So the bloodbath continues. Last Saturday’s Guardian business pages featured a very interesting little series of graphs, showing just how far major shares had fallen in the past few months. They included some of our old favourites: Persimmon, Barratt, Kier, Taylor Wimpey and, of course, Wolseley. For all of these companies have seen upwards of 80% wiped off their share value in a matter of months and that’s not something you recover from easily and quickly.

Worryingly, the graphs show a real cross-section of business types from IT and housing to building distribution and even publishing.

Sometimes companies bounce back eventually – look at M&S over the years- but not without a lot of bloodletting and financial trauma first. It doesn’t matter that at lunchtime today Wolseley’s shares were trading at 344p, nearly a whole pound higher than at their lowest point, if you bought them at the beginning of last year, you’re still down nearly eight quid a share.

And the fact that Wolseley last Friday were the FTSE’s biggest jumper wasn’t enough to save Nigel Sibley and Bob Mason from the first wave of retrenchment. For that is what it is, just the start.

There has been a lot of bloodletting already in the US for it is that housing market which was the main architect of Wolseley’s woes but now it’s the turn of the European businesses. And I repeat, this is only the start. It has to be. You don’t mend such wounds just by parting company with two of your top directors, no matter how high up they are. There have already been disposals on the States, there will surely be more over here.

Some of their more peripheral businesses might go so they could concentrate on the building distribution side. Or maybe even one of the mainstream ones: Build Center perhaps since lightside-only businesses are, at the moment, not suffering as much as those with a strong heavyside presence? It wouldn’t be easy because there’s so much cross-pollination of the brands but then nothing about this market is going to be easy in the near future and there are no simple solutions.

Obviously one question will surely be to whom? Home Depot is always a name that comes up but would a US company really want to come into the UK market when it’s looking as grim as it currently is? Maybe that’s the perfect time to enter a market. When you can do so fairly cheaply. Closer to home, Saint Gobain aren’t averse to buying competitors and either running them as stand-alones or subsuming them into the wider business.

It’s easy for me to speculate and I don’t have any of the answers. But I’m not the only one wondering what’s going to happen next because something has to.

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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