Ferguson Enterprises Inc. /DE/ (FERG) Business

Item 1.Business

Overview

Ferguson is the largest value-added distributor serving the water and air specialized professional in our $340 billion residential and non-residential North American construction market. We help make our customers’ complex projects simple, successful and sustainable by providing expertise and a wide range of products and services from plumbing, heating, ventilation and air conditioning (“HVAC”), appliances, and lighting to pipes, valves and fittings (“PVF”), water and wastewater solutions and more. We sell through a common network of distribution centers, branches, counter service and expert sales associates, showroom consultants and e-commerce channels.

The Company has a long history and maintained businesses throughout Europe, Canada and the United States in the 1900s. In the early 2000s, the Company’s focus shifted to attractive North American markets. As a result, the operating businesses across Europe were disposed of through various transactions. As part of this transition and following a corporate restructuring, Ferguson Enterprises Inc. became the ultimate parent company for the business in August 2024.

Ferguson is listed on the New York Stock Exchange (NYSE: FERG) and the London Stock Exchange (LSE: FERG).

The Company’s corporate headquarters and management office are located at 751 Lakefront Commons, Newport News, Virginia 23606 and its telephone number is +1 757-874-7795.

Business segments

The Company’s reportable segments are established based on how the Company manages its business and allocates resources, which is on a geographical basis. The Company’s reportable segments are the United States and Canada. For further segment information, see Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 2, Segment and net sales information of the Notes to the Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Annual Report (the “Consolidated Financial Statements”). Below is a description of the Company’s reportable segments.

United States segment

The United States segment contributed 95% of net sales in each of fiscal years 2025, 2024 and 2023.

The United States segment operates primarily under the Ferguson brand, providing expertise and a wide range of products and services from plumbing, HVAC, appliances, and lighting to PVF, water and wastewater solutions, and more to residential and non-residential customers. Our products are delivered through a common network of distribution centers, branches, counter service and expert sales associates, showroom consultants and e-commerce channels. As of July 31, 2025, the United States business operated 1,519 branches, 10 regional distribution centers, as well as five market distribution centers (“MDCs”) for branch replenishment and final mile distribution to customers. Our network serves our customers in all 50 states with approximately 32,000 associates, providing same-day and next-day product availability, which we believe to be a competitive advantage and an important requirement for customers.

Canada segment

The Canada segment contributed 5% of net sales in each of fiscal years 2025, 2024 and 2023.

The Canada segment operates primarily under the Wolseley brand and supplies plumbing, HVAC and refrigeration products to residential and commercial contractors. The Canada segment also supplies specialized water and wastewater treatment products to residential, commercial and infrastructure contractors, and supplies PVF solutions to industrial customers. As of July 31, 2025, the Canada business operated 227 branches, one regional distribution center and one MDC with approximately 3,000 associates.

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Business model

We have a balanced approach to attractive end markets and serve customers principally in North America. Residential and non-residential markets each account for approximately half of our net sales, with net sales within these combined markets balanced between repair, maintenance and improvement (“RMI”) (approximately two-thirds of our net sales) and new construction (approximately one-third of our net sales), based on management’s estimates.

Ferguson operates in highly fragmented markets, with no one market dominated by any single distributor. We are positioned as one of the top distributors in most end markets we serve, including residential, commercial, civil/infrastructure and industrial.

Our business bridges the gap between a large and fragmented supplier base with an even larger and more fragmented customer base. As of July 31, 2025, we had approximately 37,000 suppliers, with no supplier accounting for more than 5% of total inventory purchases, which provides us access to a diverse and broad range of quality products. As of July 31, 2025, we serve our customers through a network of 11 regional distribution centers, six MDCs, approximately 5,900 fleet vehicles, 1,746 branches and approximately 35,000 associates.

Customers

We help make our customers’ complex projects simple, successful and sustainable. We offer expertise and a broad range of products delivered where and when our customers need them. Customers rely on us to help them deliver critical infrastructure spanning almost every stage of a project’s life cycle within the residential and non-residential markets. We partner with our customers to keep millions of homes and businesses operating while helping them to run their business more efficiently. No single customer accounted for more than 1% of our net sales in fiscal 2025.

Value-added products and solutions

Our value-added solutions include a variety of sales channels available to our customers ranging from inside and outside sales teams, sales centers, digital commerce capabilities, system-to-system capabilities, counter sales and showrooms. We also offer customized solutions such as virtual design, fabrication, valve actuation, pre-assembly, kitting, installation and project management services. With our value-added solutions, we aim to increase productivity for our customers and for the industry.

We source, distribute and sell products from domestic and international suppliers. Our products include branded products and own brand products that the Company sells exclusively in the market. Approximately 95% of the products sold in the United States are sourced from U.S.-based suppliers, while approximately 90% of the products sold in Canada are sourced from Canada-based suppliers.

Our branded and private label (“Own Brand”) products are generally available from several sources and are not typically subject to supply constraints in normal market conditions. In the United States, net sales include basic products that contain significant amounts of commodity-priced materials, predominantly plastic, copper and steel, and other components which can be subject to volatile price changes based upon fluctuations in the commodities market. These commodity based products can represent up to approximately 15% of annual net sales. To a lesser extent, fluctuations in the price of fuel could affect transportation costs. In general, increases in such prices increase our operating costs and negatively impact our operating profit to the extent that such increases cannot be passed on to customers. Conversely, if competitive pressures allow us to hold prices despite relevant raw material prices falling, profitability can increase.

Fulfillment options for our customers include delivery, customer pick-up from our branches, counters and locker locations, and direct shipments.

We also offer after-sales support that comprises warranty, credit, project-based billing, returns and maintenance, repair and operations (“MRO”) support.

Global supply chain

We have a global supply chain which provides access to approximately 37,000 suppliers and we sell more than 1 million unique products each year. We operate an extensive network across North America, including three import centers, 11 regional distribution centers and 1,746 branch locations as of July 31, 2025. Our network also includes six MDCs which provide greater access to key strategic markets and allows us to bring our products closer to our customers. These MDCs include automated picking and replenishment systems for the majority of items. This automation improves efficiency and reduces manual handling of certain products which supports associate health and safety.

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Competitive conditions

We believe we are well-equipped to win new market share and generate attractive returns. We have leading positions in the residential and non-residential markets based on net sales as a percentage of overall market size. For fiscal 2025, residential and non-residential markets each account for approximately half of our net sales, with net sales within these combined markets balanced between RMI (approximately two-thirds of our net sales) and new construction (approximately one-third of our net sales), based on management’s estimates. We have chosen to operate in each of these markets because we believe we can generate strong growth, solid gross and operating margins and good returns on capital.

The markets we serve are highly fragmented with very few large competitors and a high number of small, local distributors, as well as mid-size regional distributors. While our market positions can be expanded through growth of our existing business, acquisitions also remain a core part of our growth strategy and we expect to focus on acquisitions that bolt-on to our existing branch network as well as acquisitions that provide further capabilities to serve our customers. We believe there is a significant opportunity for strong growth and continued consolidation within our markets.

Many customer projects require a range of products and solutions and we leverage our scale and expertise across the organization for the benefit of our customers. Specifically, we believe our network of suppliers, associates and the number of branches and distribution centers provide us with the scale and expertise to serve our customers better than our competitors do, as many of these competitors operate only locally. In addition, we also benefit from significant synergies to help lower operating costs and improve margins. We believe these factors will enable continued growth in net sales as well as growth in cash flow and, therefore, may better enable us to provide investment returns to shareholders.

Our scale and expertise position us to be involved in all stages of our customers’ projects, including design, staging, and project management. Across all our customers, we take a consultative approach. We partner with our customers in an effort to guide complex projects to a successful conclusion, and to make the entire project better because Ferguson was involved.

Contractual relationships and seasonality

We are not dependent on any material licenses, industrial, commercial or financial contracts (including contracts with customers and suppliers) or new manufacturing processes. Our business is not highly seasonal although we generally experience the highest volume of sales in our fourth fiscal quarter which begins during the spring season in North America.

Intellectual property

We rely on a combination of intellectual property laws, confidentiality procedures and contractual provisions to protect our proprietary assets and our brands. We have registered or applied for registration of trademarks, service marks, and internet domain names, both domestically and internationally.

Regulatory landscape

Our operations are affected by various statutes, regulations and standards in the countries and markets in which we operate, including the United States and Canada. The amount of such regulation and the penalties for any breaches can vary. While we are not engaged in a highly regulated industry, we are subject to the laws governing businesses generally, including laws relating to competition, product safety, data protection, labor and employment practices, accounting and tax standards, international trade, fraud, bribery and corruption, land usage, the environment, health and safety, transportation, payment terms and other matters. We do not currently expect compliance with these laws and regulations to have a material effect on our capital expenditures, results of operations, or competitive position as compared to prior periods.

Human capital management

Our associates are fundamental to the long-term success of the Company. We continue to invest in the development of our associates and are committed to attracting, developing, engaging and retaining the best talent. Our associate base includes a mix of tenured associates and external hires, blended with new talent through acquisitions.

As of July 31, 2025, Ferguson employed approximately 35,000 associates worldwide, including those employed on a full-time, part-time, seasonal or temporary basis, which includes approximately 32,000 associates in the United States, 3,000 associates in Canada and small number of associates who reside outside of the United States and Canada.

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Key areas of our human capital management program include the following:

Attracting top talent

We seek the best associates in our industry. Our hiring process is intended to reach a diverse talent pool to assist us in fostering a culture of strong relationships where differences in thought, experience and perspective contribute to our ability to help make our customers’ projects simple, successful and sustainable.

Promoting growth

Ferguson is committed to creating meaningful, long-term career opportunities for associates to grow and succeed. The career paths of our senior leadership team demonstrate our commitment to identifying and developing the next generation of talent. Through internal mobility, many of our leaders shifted from frontline roles to managerial roles. Our learning and development initiatives are designed to foster both immediate skill-building and sustained professional advancement, helping associates thrive throughout their careers. We offer a variety of leadership and development programs that develop skills and capabilities for our associates and leaders. These programs are tailored to associates’ roles, leadership level and potential. The Company also offers associates professional development courses, many of which are on-demand and targeted at improving technical skills, sales, communication, wellbeing, critical thinking and relationship management skills.

Fostering engagement and retention

We strive to create an environment where our associates can bring their true, authentic selves to work every day.

Our Business Resource Groups (“BRGs”) play a role in our effort to enhance the overall wellbeing of our associates, support professional development and create a positive workplace environment. Membership for each BRG is open to all our associates and participation is voluntary.

Our associates’ voices matter. To support engagement and retention of our associates, we conduct an annual survey where associates can provide us with their feedback. From the resulting data, we develop an action plan designed to make improvements in the areas our associates indicated that they value most. In addition, we are committed to supporting our associates as well as customers and people within our communities. Through a variety of outreach efforts, we provide our associates with the opportunity to engage directly in community service.

We offer these development and engagement programs to aid in the growth, engagement and retention of our associates. We believe that these programs support our objective to retain the best talent.

Culture and values

We strive to maintain a culture of integrity and are committed to acting ethically in all our business activities. This commitment is outlined in our Code of Business Conduct and Ethics (“Code of Conduct”), which sets forth the standards that we expect of our associates and those who may work on our behalf. The Code of Conduct is a resource dedicated to helping our associates live by our values and understand Ferguson’s commitment to compliance with all applicable laws and regulations and Company policies. We require new associates to complete our Code of Conduct training upon hire and all current associates to complete our Code of Conduct training on an annual basis.

Equal employment opportunity policy

Ferguson recruits, hires, transfers, promotes, compensates, trains, terminates and is committed to making employment decisions about applicants and associates without regard to their race, color, religion, creed, national origin, ancestry, citizenship status, physical disability, mental disability, medical condition, genetic information, marital status, pregnancy, sex, gender, gender identity, gender expression, age, sexual orientation, military and/or veteran status or any other basis protected by law.

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Compensation and rewards

We are committed to offering competitive, comprehensive compensation and benefits that support the wellbeing of our associates. We regularly assess our total rewards programs, including compensation and recognition programs, in an effort to provide equitable and competitive programs that align with our overall compensation philosophy. We are committed to rewarding our associates based on achievement of organizational goals and individual performance. We offer a variety of health, welfare, and financial benefits to our full-time and part-time associates, including health care and insurance benefits, mental health and wellbeing resources, retirement plans, and an employee share purchase plan, among others.

We believe acknowledging exceptional performance contributes to company success. We have prioritized and invested in associate recognition. Our Bravo! program is designed to foster a culture of mutual recognition by enabling associates to recognize, appreciate and celebrate each other, no matter their role. Additionally, we have several established formal programs to recognize top performing sales associates and managers for their outstanding contributions. We also award associates who consistently demonstrate four core behaviors of being: passionate, resilient, customer driven and solution-oriented.

Health and safety

We strive to drive continuous improvement in our health and safety performance by maintaining high standards for our health and safety compliance programs as well as training our associates on and enforcing expected safe behaviors and global safety rules. We promote a culture of “first in safety,” which is supported by a commitment from our executive leadership and through engagement with our associates. We endeavor to ensure that at each location, our associates and our contractors are well-informed about health and safety measures and are provided with the appropriate equipment and tools to protect themselves and those around them. Our safety efforts are further supported by the allocation of additional resources for safety improvements and the employment of dedicated safety professionals. Through continuous investment in health and safety, we aim to mitigate the risk of and minimize exposure to on-the-job injuries.

Sustainability Report

Additional information regarding our activities related to sustainability and human capital management matters, including our people and communities, can be found in our most recent Sustainability Report, which is available on our website. The contents of the Sustainability Report are not incorporated by reference into this Annual Report or in any other report or document we file with or furnish to the SEC.

Available information

The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”). In accordance with these requirements, the Company files reports and other information with the SEC. The SEC maintains an internet site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The Company’s website is corporate.ferguson.com. The Company’s reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments thereto, are available, free of charge, through the Company’s website as soon as reasonably practicable after the material is electronically filed with or furnished to the SEC.

Any references to the Company’s website contained herein do not constitute incorporation by reference of information contained on such website and such information should not be considered part of this Annual Report.