The distribution segment of Myers Industries (Akron, OH) saw its total income from operations before income taxes fall 7.9 percent to $2.79 million in the second quarter of 2018. Net sales for the business — which is mainly composed of Myers Tire Supply — declined 4.5 percent to $37.48 million. However, gross margin expanded, and adjusted EBITDA margin was flat year-over-year.
Over 50 percent of the segment sales decrease came from equipment sales and the MTS International business. Management cited a number of factors for distribution’s sales shortfall, including salesforce turnover in certain territories, which resulted in coverage gaps and lower sales volumes.
President and CEO Dave Banyard told analysts on the company’s July 30 conference call that the distribution segment continues to make progress, albeit at a slower rate than management is happy with. “We are making some progress, and we see that in our daily sales run rate of consumables in our domestic business, which increased year-over-year in the second quarter,” he explained. “And, the gross profit margin expanded year-over-year in the second quarter as well.”
“There are two key areas that we’re focused on in this business to help continue to improve it,” Banyard said on the call. “One of them is putting the right tools in the hands of our sales force, and we’re doing that with a number of different initiatives. One in particular is a sales contest, where we are incenting the sales force to focus on certain product lines as well as certain customers in certain segments. We did a bit of that in the first quarter through the second quarter with some success, and we’re continuing that here in the third quarter.
“Secondly, we are very focused on recruiting and training — that’s both retaining the people we have and training them better, as well as recruiting the best people we can and training them well.”
For the full year, management expects Myers’ distribution segment sales to decrease in the low-single digits. “We expected it to be flat in the second quarter, and we were not. So, we’re muting our expectations here,” Banyard explained. “We do expect to grow in the second half of the year, but we don’t expect that sales growth will be enough to overcome the declines that we had in the first half.”