HD Supply Reports Healthy Q3 Growth

On the heels of selling its Hardware Solutions business unit to The Home Depot, HD Supply's third quarter performance represents the 18th consecutive quarter of year-over-year average daily sales growth.

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ATLANTA, GA — HD Supply Holdings, Inc. (NASDAQ: HDS), No. 4 on Industrial Distribution's 2014 Big 50 List, on Tuesday reported Net sales for the third quarter of fiscal 2014 ended Nov. 2 of $2.5 billion, an increase of $215 million, or 9 percent, as compared to Q3 2013. The third quarter performance represents the 18th consecutive quarter of year-over-year average daily sales growth. The company believes its sales performance represents growth of approximately 600 basis points in excess of its market growth estimate.

“I was very pleased with our strong performance this quarter,” stated Joe DeAngelo, CEO of HD Supply. “We remain focused on controllable execution to deliver profitable growth in excess of our market growth estimate.”

Gross profit increased $64 million, or 10 percent, to $726 million for Q3 2014 compared to $662 million for Q3 2013. Gross profit was 29.2 percent of net sales for Q3 2014, up approximately 10 basis points from 29.1 percent of net sales for Q3 2013.

Operating income increased $42 million, or 26 percent, to $202 million for Q3 2014 compared to $160 million for Q3 2013. The improvement was primarily driven by higher net sales and gross profit, partially offset by higher operating expenses.

Adjusted EBITDA increased $39 million, or 17 percent, to $265 million for Q3 2014 compared to $226 million for Q3 2013.

Net income increased $9 million to $60 million for Q3 2014 as compared to a net income of $51 million in Q3 2013. Adjusted net income increased $35 million to $111 million for Q3 2014 as compared to an adjusted net income of $76 million in Q3 2013.

Business Unit Performance

Facilities Maintenance: Net sales increased $50 million, or 8 percent, to $660 million in Q3 2014 as compared to $610 million in Q3 2013.

Waterworks: Net sales increased $62 million, or 10 percent, to $695 million in Q3 2014 as compared to $633 million in Q3 2013.

Power Solutions: Net sales increased $30 million, or 6 percent, to $502 million in Q3 2014, as compared to $472 million in Q3 2013.

Construction & Industrial - White Cap: Net sales increased $59 million, or 17 percent, to $411 million in Q3 2014 as compared to $352 million in Q3 2013.

Year-to-Date Results

Net sales for the first nine months of fiscal 2014 increased $538 million, or 8 percent, to $7.1 billion, as compared to $6.6 billion the first nine months of fiscal 2013. Gross profit for the first nine months of fiscal 2014 increased by $167 million, or 9 percent, to $2.1 billion.

Operating income for the first nine months of fiscal 2014 increased $94 million, or 23 percent, to $507 million.

Net income for the first nine months of fiscal 2014 increased $248 million to $96 million compared to a Net loss of $152 million for the first nine months of fiscal 2013.

Adjusted net income for the first nine months of fiscal 2014 increased $153 million to $252 million compared to an adjusted net income of $99 million in the first nine months of fiscal 2013.

Third-Quarter Monthly Sales Performance

Net sales for August, September and October were $785 million, $750 million and $953 million, respectively. There were 20 selling days in August, 19 selling days in September and 25 selling days in October. Average year-over-year daily sales growth for August, September and October were 10.1 percent, 10.0 percent and 8.6 percent, respectively.

Subsequent Events

On December 1, 2014, HD Supply entered into a definitive purchase agreement to sell its Hardware Solutions business unit, formerly known as Crown Bolt, to The Home Depot. Approximately 98 percent of Hardware Solutions’ 2013 sales were attributable to The Home Depot. The transaction is expected to close by the end of fiscal year 2014, subject to satisfaction of customary closing conditions. In accordance with Accounting Standard Codification 205-20, Discontinued Operations, the results of Hardware Solutions and an expected small gain on sale of the business will be classified as discontinued operations beginning in the fourth quarter of fiscal 2014. The tables beginning on page 12 provide revised historical quarterly financial results presenting Hardware Solutions as an expected discontinued operation.

Preliminary November Sales

Preliminary Net sales in November were $668 million. There were 18 selling days in November and average daily sales were up 6.5 percent versus prior year. Excluding Hardware Solutions, preliminary net sales in November were $648 million. Preliminary November year-over-year average daily sales growth by business is Facilities Maintenance 7.5 percent, Waterworks 7.4 percent, Power Solutions (0.7) percent, and Construction & Industrial – White Cap 16.2 percent.

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