ST. LOUIS — Core & Main Inc. on Tuesday announced financial results for the third quarter ended Oct. 29, 2023.
"We are pleased to have delivered another quarter of strong results," said Steve LeClair, chief executive officer of Core & Main.
"Demand from our customers remains resilient and we continue to execute on both our organic and inorganic growth initiatives. Gross margins were 50 basis points lower than last year as inventory costs continue to catch up with current market prices, but we are pleased to see gross margins sustain at higher levels as we work to drive our margin initiatives through our nationwide branch network.
"Cash generation remains a key strength of our business and we delivered an impressive $373 million of operating cash flow during the third quarter. This provided us the capacity to reinvest in organic and inorganic growth, while returning capital to shareholders. Along those lines, we executed one share repurchase transaction during the quarter and another after the quarter, deploying nearly $300 million of capital to retire 10 million shares. We have deployed $770 million of capital so far this year to repurchase and retire 30 million shares in total.
"Our team has never been more energized about the growth opportunities ahead, and we look forward to executing on the long-term targets we presented during our Investor Day in October. We have numerous levers to drive profitable growth and cash flow, and we have the right team and resources in place to do so. I want to thank our associates for their continued commitment to providing our customers with local knowledge, local experience and local service, nationwide."
- Net sales for the three months ended Oct. 29 increased $9 million, or 0.5%, to $1.827 billions compared with $1.818 billion for the three months ended Oct. 30, 2022. Net sales increased primarily due to acquisitions partially offset by comparably lower end-market volumes. Net sales declines for pipes, valves & fittings were due to lower end-market volume partially offset by acquisitions. Net sales growth for storm drainage products benefited from higher volume primarily related to acquisitions. Net sales for fire protection products declined due to lower selling prices and lower volume on steel pipe. Net sales of meter products benefited from acquisitions and higher volumes due to an increasing adoption of smart meter technology.
- Gross profit decreased $6 million, or 1.2%, to $494 million compared with $500 million for the three months ended October 30, 2022. Gross profit as a percentage of net sales for the three months ended October 29, 2023 was 27.0% compared with 27.5% for the three months ended October 30, 2022. The overall decline in gross profit as a percentage of net sales was primarily attributable to larger prior year benefits from strategic inventory investments during an inflationary environment, partially offset by favorable impacts from the execution of gross margin initiatives.
- Net income decreased $20 million, or 11.2%, to $158 million compared with $178 million for the three months ended October 30, 2022. The decrease in net income was primarily attributable to a decrease in operating income. Adjusted EBITDA for the three months ended October 29, 2023 decreased $15 million, or 5.5%, to $260 million compared with $275 million for the three months ended October 30, 2022. The decrease in Adjusted EBITDA was primarily attributable to lower gross profit and higher SG&A expenses. Adjusted EBITDA margin decreased 90 basis points to 14.2% from 15.1% in the prior year period.
"Our sales results through the third quarter have largely played out as expected," LeClair said. "As a result, we are narrowing our expectation for net sales to be in the range of $6.65 to $6.75 billion.
"We are raising our expectation for adjusted EBITDA to be in the range of $890 to $910 million due to our strong margin performance in the third quarter, as well as confidence in our ability to better sustain margins through the end of the year. We are also raising our expectation for operating cash flow conversion to be in the range of 110% to 115% of Adjusted EBITDA as a result of our disciplined inventory optimization efforts. We expect to continue deploying capital on initiatives that will result in accelerated growth, including executing on our robust M&A pipeline and delivering on our organic growth initiatives. We also maintain significant liquidity and expect to continue driving shareholder value through share repurchases or dividends."