ST. LOUIS — Core & Main Inc. on Tuesday announced financial results for the fourth quarter and fiscal year ended Jan. 28, 2024.
"Fiscal 2023 was an exceptional year for Core & Main given the extraordinary performance we achieved during the preceding two years and considering the softer market conditions that have followed," said Steve LeClair, chairman and chief executive officer of Core & Main.
"Our teams navigated the dynamic environment to deliver strong financial performance, including net sales of over $6.7 billion, Adjusted EBITDA of $910 million and record operating cash flow of approximately $1.1 billion, providing us the capacity to make significant investments in organic and inorganic growth while returning capital to shareholders. We invested $780 million on 10 acquisitions during and after the year to enhance our geographic footprint, expand our product offering and acquire key talent. Each of these businesses is a key source of local knowledge and expertise, and they enhance our competitive position as we grow. We also deployed approximately $1.3 billion of capital to repurchase and retire 45 million shares while maintaining a strong balance sheet capable of investing in future growth."
"I would like to thank our associates, suppliers and customers for their dedication to serving our communities and building reliable infrastructure for generations to come. I would also like to thank the board of directors for appointing me chairman of the board and trusting me to lead this great organization. We have generated a significant amount of momentum for the business in recent months between the acquisitions we completed, the internal investments we made and the value we returned to shareholders, and we look forward to capitalizing on that momentum in fiscal 2024. We have never been better positioned to compete in this highly fragmented industry and execute our strategy to capture market share while driving long-term profitable growth."
Fourth Quarter
Net sales for the three months ended January 28, 2024 increased $66 million, or 4.8%, to $1,440 million compared with $1,374 million for the three months ended January 29, 2023. Net sales increased primarily due to volume growth and acquisitions. Net sales growth for pipes, valves & fittings and storm drainage products benefited from higher volumes primarily related to acquisitions. Net sales for fire protection products increased due to higher volumes and acquisitions partially offset by lower selling prices for steel pipe. Net sales of meter products benefited from higher volumes due to an increasing adoption of smart meter technology by municipalities, acquisitions and an improving supply chain.
Gross profit for the three months ended January 28, 2024 increased $11 million, or 2.9%, to $384 million compared with $373 million for the three months ended January 29, 2023. Gross profit as a percentage of net sales for the three months ended January 28, 2024 was 26.7% compared with 27.1% for the three months ended January 29, 2023. The overall decline in gross profit as a percentage of net sales was primarily attributable to normalization of larger prior year benefits from strategic inventory investments during an inflationary environment partially offset by the execution of our gross margin initiatives.
Selling, general and administrative (“SG&A”) expenses for the three months ended January 28, 2024 increased $17 million, or 8.0%, to $230 million compared with $213 million for the three months ended January 29, 2023. The increase was primarily attributable to an increase of $10 million in personnel expenses along with higher facility and distribution costs related to inflation and acquisitions. SG&A expenses as a percentage of net sales was 16.0% for the three months ended January 28, 2024 compared with 15.5% for the three months ended January 29, 2023. The increase was attributable to inflationary cost impacts, investments to support growth and acquisitions with relatively higher SG&A rates.
Net income for the three months ended January 28, 2024 decreased $8 million, or 9.5%, to $76 million compared with $84 million for the three months ended January 29, 2023. The decrease in net income was primarily attributable to higher SG&A expenses and higher interest expense attributable to an increase in interest rates on our variable-rate debt.
The Class A common stock basic earnings per share for the three months ended January 28, 2024 increased $0.04, or 12.9%, to $0.35 compared with $0.31 for the three months ended January 29, 2023. The Class A common stock diluted earnings per share for the three months ended January 28, 2024 increased $0.03, or 9.7%, to $0.34 compared with $0.31 during the three months ended January 29, 2023. The basic earnings per share increased due to an increase in net income attributable to Core & Main, Inc. partially offset by higher Class A share counts from exchanges of partnership interests of Core & Main Holdings, LP. The diluted earnings per share increased due to lower share counts following the share repurchase transactions executed throughout fiscal 2023 partially offset by a decline in net income.
Adjusted EBITDA for the three months ended January 28, 2024 decreased $4 million, or 2.4%, to $160 million compared with $164 million for the three months ended January 29, 2023. The decrease in Adjusted EBITDA was primarily attributable to higher SG&A expenses. Adjusted EBITDA margin decreased 80 basis points to 11.1% from 11.9% in the prior year period.
Fiscal Year
Net sales for fiscal 2023 increased $51 million, or 0.8%, to $6,702 million compared with $6,651 million for fiscal 2022. The increase in net sales was primarily attributable to higher selling prices and acquisitions partially offset by a reduction in volume from comparably lower end-market volumes. Net sales declines for pipes, valves & fittings were due to lower end-market volumes partially offset by higher selling prices and acquisitions. Net sales growth for storm drainage products benefited from higher selling prices, volume growth and acquisitions. Net sales for fire protection products declined due to lower selling prices and lower volume partially offset by acquisitions. Net sales of meter products benefited from higher selling prices, higher volumes due to an increasing adoption of smart meter technology by municipalities, acquisitions and an improving supply chain.
Gross profit for fiscal 2023 increased $23 million, or 1.3%, to $1,818 million compared with $1,795 million for fiscal 2022. Gross profit increased due to an increase in net sales and an increase in gross profit as a percentage of net sales. Gross profit as a percentage of net sales for fiscal 2023 was 27.1% compared with 27.0% for fiscal 2022. The overall increase in gross profit as a percentage of net sales was primarily attributable to execution of our gross margin initiatives partially offset by normalization of larger prior year benefits from strategic inventory investments during an inflationary environment.
Selling, general and administrative expenses for fiscal 2023 increased $51 million, or 5.8%, to $931 million compared with $880 million during fiscal 2022. The increase was primarily attributable to an increase of $23 million in personnel expenses along with higher facility and distribution costs related to inflation and acquisitions. SG&A expenses as a percentage of net sales was 13.9% for fiscal 2023 compared with 13.2% for fiscal 2022. The increase was primarily attributable to inflationary costs impacts, investments to support growth and acquisitions with relatively higher SG&A rates.
Net income for fiscal 2023 decreased $50 million, or 8.6%, to $531 million compared with $581 million for fiscal 2022. The decrease in net income was primarily attributable to higher SG&A expense and higher interest expense due to an increase in interest rates on our variable-rate debt.
The Class A common stock basic earnings per share for fiscal 2023 decreased 0.5% to $2.15 compared with $2.16 for fiscal 2022. The Class A common stock diluted earnings per share for fiscal 2023 increased 0.9% to $2.15 compared with $2.13 for fiscal 2022. The decrease in basic earnings per share was primarily attributable to higher Class A share counts from exchanges of partnership interests of Core & Main Holdings, LP partially offset by an increase in net income attributable to Core & Main, Inc. Diluted earnings per share increased due to lower share counts following the share repurchase transactions executed throughout fiscal 2023 partially offset by a decline in net income.
Adjusted EBITDA for fiscal 2023 decreased $25 million, or 2.7%, to $910 million compared with $935 million for fiscal 2022. The decrease in Adjusted EBITDA was primarily attributable to higher SG&A expenses partially offset by higher gross profit. Adjusted EBITDA margin decreased 50 basis points to 13.6% from 14.1% in the prior year period.
Fiscal 2024 Outlook
- Net sales of $7,400 to $7,600 million
- Adjusted EBITDA (Non-GAAP) of $925 to $975 million
- Adjusted EBITDA margin (Non-GAAP) of 12.5% to 12.8%
- Operating Cash Flow Conversion (Non-GAAP) of 60% to 70% of Adjusted EBITDA
"We expect end market volumes to improve in fiscal 2024, providing a foundation for us to gain market share through the execution of our product, customer and geographic expansion initiatives," LeClair said. "We expect the M&A we completed during and after the year to contribute 6% to 7% of our sales growth in fiscal 2024. We anticipate price contribution will be roughly flat for the year and we expect another 30 to 50 basis points of gross margin normalization from our fiscal 2023 fourth quarter results.
"Taken altogether, we expect net sales to range from $7.4 to $7.6 billion and we expect Adjusted EBITDA to range from $925 to $975 million. We expect to generate strong operating cash flow in fiscal 2024 and remain committed to deploying capital to initiatives that will result in accelerated growth or value creation for our shareholders."
