Agrium (AGU) reports sales under two segments: retail and wholesale. The retail segment contributed about 87% of the company’s 2Q16 sales, while the remainder came from the wholesale segment. Through its retail channel, Agrium sells crop protection products, crop nutrients, seeds, and other services. Crop protection and crop nutrients account for a significant share of sales within the retail segment.
The wholesale segment includes the sale of nitrogen, phosphate, and potash crop nutrients. Nitrogen sales account for the majority of the segment’s sales. PotashCorp (POT), Mosaic (MOS), and CF Industries (CF) are active participants in this space.
In 3Q16, Wall Street analysts estimate that Agrium’s sales will fall 5% to $2.4 billion from $2.5 billion in 3Q15. In fiscal 2016, the company’s sales are expected to fall 6% to $13.9 billion from $14.8 billion. Agrium’s sales decline has been softer than the fall experienced by PotashCorp, Mosaic, and CF Industries. Analysts estimate that the company’s sales will grow 4% in fiscal 2017.
The retail segment
The retail segment is the primary reason for Agrium’s low sales volatility year-over-year. The retail business is fairly stable compared with wholesale commodities (IYM). With a network of more than 1,400 retail locations, most of which are located within the United States, the company appears to have established stability in the retail segment.
However, between 2013 and 2015, same-store sales, the key metric used to measure the success of the retail segment, declined. In the next part, we’ll discuss estimates for Agrium’s gross margin.