TruGreen Saps ServiceMaster’s Quarter

By Bill Dries

The ServiceMaster Co. announced a third-quarter operating loss of $724 million Wednesday, Nov. 14.

Hank Mullany, CEO of the Memphis-based provider of home and commercial services, spotlighted results in the company’s TruGreen lawn care business, which has been a priority of his since he became CEO in April 2011.

“Obviously, our third-quarter results overall and TruGreen’s in particular didn’t meet our expectations,” Mullany said in a written statement in advance of a Wednesday afternoon earnings call with investors and analysts. “We will get TruGreen on track.”

TruGreen president Tom Brackett announced his resignation in October, less than a year after he was named president of the division.

"I don't think you should read anything into his departure," Mullany said in response to a question from an analyst on the Wednesday afternoon earnings call. Mullany said TruGreen remains "a very strong business" that ServiceMaster is adjusting.

Some of the drop in revenue was expected because of a strategy of de-emphasizing TruGreen's door-to-door neighborhood marketing. The unexpected part of the decline was customer reaction to the more expensive Healthy Lawn program TruGreen offered to residential customers.

"We are going to offer our customers more choices next year," Mullany said.

Mullany had tapped Brackett from ServiceMaster’s Terminix division to lead TruGreen.

It was the first major decision Mullany made when he arrived at ServiceMaster. Mullany wanted to apply a successful sales model in particular at Terminix to TruGreen. Brackett began as the interim head of TruGreen and his move to the brand became permanent later.

Mullany himself is now serving as interim president of TruGreen.

Revenues across ServiceMaster’s collection of seven businesses including franchises totaled $901 million, down 3.2 percent form the third quarter of 2011.

Excluding TruGreen, company executives pointed out, ServiceMaster’s operating revenues were up 4.2 percent for the quarter year over year.

And TruGreen bore most of the blame for the company’s forecast of consolidated operating revenue for the year that will be “slightly below” 2011 figures. ServiceMaster is also forecasting consolidated operating performance for the year will be 5 to 9 percent lower than the performance for 2011.

Without the TruGreen numbers, consolidated revenue for the year was forecast to be 5 percent higher than the year before and the consolidated operating performance 2 to 6 percent higher.

TruGreen had higher fuel, fertilizer, labor and technology costs from a new operating system that contributed to the grim numbers and the cutbacks in ServiceMaster’s other segments to offset the overall shortfall.

But Mullany’s initial comments with the release of the numbers Wednesday morning indicated he and other leaders are still working on a successful sales model for the lawn care business.