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View All NewsWorld – Kelly Services revenue down 5%; cites weakening manufacturing sector, softer demand in Europe
Fourth-quarter revenue fell 5.2% in constant currency at Kelly Services Inc. (NASDAQ: KELYA). The US-based staffing giant cited a weakening manufacturing sector in the US and softening demand in Europe. US revenue was down 5.1%.
Still, gross margin improved.
| (USD millions) | Q4 2019 | Q4 2018 | % change | % constant currency |
| Revenue | 1,337.8 | 1,414.7 | -5.4% | -5.2% |
| Gross profit | 245.1 | 254.4 | -3.7% | 3.4% |
| Gross margin | 18.3% | 18.0% | - | - |
| Net earnings/loss | $17.0 | ($23.9) | - | - |
“Q4 continued the underlying dynamics we saw in Q3, including a weaker manufacturing sector, economic headwinds in Europe, and disruption from the 2019 restructuring of our US operations,” President and CEO Peter Quigley said.
Quigley said that looking ahead, returning to top-line growth is a priority. To that end, Kelly Services has recently sold and leased back its headquarters building to free up capital, acquired New Jersey, US-based education staffing firm Insight and appointed its first ever chief growth officer among other steps.
Quigley also said Kelly Services plans to make several other changes. One of those will be to manage the company by specialty with those specialty divisions to include “professional and industrial” (formerly commercial); education; STEM (including science, engineering and IT); OCG; and international. Each division will be led by a president that reports directly to Quigley.
Kelly Services also plans to accelerate M&A plans.
Net earnings in the fourth quarter showed an improvement compared to a net loss in the year-ago quarter. The fourth quarter of 2019 includes a $15.8 million asset impairment charge, according to the company. Separately, the fourth quarter of 2018 includes the impact of a non-cash, after-tax loss on Kelly’s investment in Persol Holdings that amounted to $1.49 per share.
Revenue by segment
| (USD millions) | Q4 2019 | Q4 2018 | % change | % constant currency |
| Americas staffing | 580.0 | 647.6 | -10.4% | -10.5% |
| Global talent solutions | 515.1 | 503.3 | 2.3% | 2.4% |
| International staffing | 246.0 | 268.1 | -8.2% | -7.1% |
Global talent solutions’ revenue — which encompasses contingent workforce outsourcing, recruitment process outsourcing and other services — for the fourth quarter includes the impact of the GTA acquisition.
Revenue by geography
| (USD millions) | Q4 2019 | Q4 2018 | % change | % constant currency |
| Americas | ||||
| United States | 979.1 | 1,031.6 | -5.1% | -5.1% |
| Canada | 35.3 | 34.8 | 1.2% | 1.2% |
| Mexico | 34.0 | 32.3 | 5.2% | 2.1% |
| Puerto Rico | 17.0 | 22.4 | -24.5% | -24.5% |
| Brazil | 9.0 | 8.6 | 6.3% | 13.1% |
| Europe, Middle East and Africa | ||||
| France | 60.0 | 66.2 | -9.3% | -6.5% |
| Switzerland | 50.7 | 56.4 | -10.0% | -10.5% |
| Portugal | 44.3 | 46.4 | -4.7% | -1.8% |
| Russia | 33.5 | 24.7 | 35.7% | 29.8% |
| United Kingdom | 21.5 | 23.2 | -7.5% | -7.4% |
| Italy | 16.1 | 19.4 | -16.9% | -14.4% |
| Germany | 9.1 | 12.1 | -24.7% | -22.4% |
| Ireland | 5.0 | 10.3 | -52.2% | -50.8% |
| Other EMEA | 16.0 | 21.0 | -23.7% | -19.8% |
| Asia Pacific | ||||
| Total APAC | 7.2 | 5.3 | 35.5% | 39.8% |
Full-year results
| (USD millions) | 2019 | 2018 | % change | % constant currency |
| Revenue | 5,355.6 | 5,513.9 | -2.9% | -1.9% |
| Gross profit | 968.4 | 972.2 | -0.4% | 0.5% |
| Gross margin | 18.1% | 17.6% | - | - |
| Net earnings | 112.4 | 22.9 | 390.2% | - |
Kelly Services expects full-year 2020 revenue to be up between 3% and 4%.
Despite the weak performance, in trading yesterday, Kelly Services shares closed at $20.63, up 13.48% on the day and 21.57% above the 52 week low of $16.97 set on 10 February 2020. Based on its current share price the company has a market value of $794.46 million.