The Reading-based firm - which trades as Plumb Center and Build Center - announced this week that it would cut 2,000 jobs and close more than 200 branches in the UK and Ireland.
It is not the first company in the building supplies sector to report difficulties.
Earlier this year, Travis Perkins announced it would cut around 1,300 jobs before January. The majority of the losses will be in its builders merchant division, totalling 1,000 by the end of the year. Like Wolseley, it blamed weakening markets for its problems.
Chip Hornsby, group chief executive of Wolseley, said: “We have seen a rapid deterioration in activity in the UK and Ireland over the past three months. Trading profits have decreased by around 65 per cent in the three months to 31 October.”
Revenues are also down by around 10 per cent.
To offset the losses, Wolseley will make the cuts in phases over the next few months.
The job cuts at Wolseley’s UK and Ireland division, which are expected to reduce annual costs by £80 million, will cost the firm £45 million this financial year.
The pressure on Wolseley to reduce overheads was highlighted in its first quarter figures, which showed group trading profits down 30 per cent due to lower profitability at its UK and American operations.
In its interim trading statement, released ahead of its annual general meeting, the company said: “Our objective remains to ensure the appropriate sizing of the cost base in line with the expected market environment.”
Wolseley will also consider selling property and business assets in order to raise capital.
Steve Webster, chief finance officer at Wolseley Group, said: “In the year ending June 2008, we made £100 million selling property and business assets. We have a similar number in our minds for this year.”
Analysis: More cutbacks are likely to follow
By Charlie Mullins
It’s a sad situation, but ultimately the building supplies sector’s troubles may lead to price cuts for customers as competition within the industry grows and suppliers battle to secure trade. We’re surprised Wolseley didn’t put measures in place earlier as the warning signs have been there for a long time.
With Wolseley being hit so hard it really brings home that no-one is safe. This will only be the start for Wolseley and more cutbacks are likely to follow.
As a company they depend on the housing sector, which is unlikely to see recovery for a long time.
More businesses are also likely to go the same way and things won’t change overnight. This could be just the start.
Charlie Mullins, managing director of Pimlico Plumbers, London’s largest independent plumbing firm