HD Supply Announces 2016 First Quarter Results

ATLANTA—HD Supply Holdings, Inc. (NASDAQ:HDS) today reported Net sales of $1.8 billion for the first quarter of fiscal 2016 ended May 1, 2016, an increase of $121 million, or 7.3 percent, as compared to the first quarter of fiscal 2015.  The company believes its sales performance represents growth of approximately 400 basis points in excess of its market growth estimate.

The construction and industrial business unit (White Cap) had net sales of $447 million for the first quarter, an increase of $40 million, or 9.8 percent as compared to $407 million for the first quarter of fiscal 2015.

“I am extremely pleased with the team’s performance in the first-quarter of 2016. We delivered 7 percent net sales growth, 14 percent Adjusted EBITDA growth and 104 percent Adjusted Net Income per Diluted Share growth despite a challenging uncontrollable environment,” stated Joe DeAngelo, Chairman and CEO of HD Supply. “We focused on what we could control and delivered solid profitable growth, operating leverage and free cash flow.”

Gross profit increased $50 million, or 8.9 percent, to $609 million. Gross profit was 34.2 percent of Net sales for the first quarter of fiscal 2016, up approximately 50 basis points from 33.7 percent of Net sales for first quarter of fiscal of 2015.

Operating income increased $22 million, or 14.1 percent, to $178 million for the first quarter. Net income decreased $256 million to a Net loss of $14 million. Adjusted net income increased $52 million to $103 million.

In April 2016, the Company entered into a definitive agreement to sell its Interior Solutions business unit, formerly known as Creative Touch Interiors.  The transaction closed on May 31, 2016.

On April 11, 2016, HD Supply, Inc. issued $1,000 million aggregate principal amount of 5.75% Senior Unsecured Notes due 2024. On April 27, 2016, HD Supply Inc. used the proceeds from the 5.75% Senior Unsecured Notes issuance to redeem all of its outstanding $1,000 million aggregate principal amount of 11.5% Senior Unsecured Notes due 2020. As a result, the company incurred a $115 million loss on extinguishment of the debt. The transactions reduce future interest expense by approximately $58 million annually.

As of May 1, 2016, HD Supply’s combined liquidity of approximately $1,268 million was comprised of $203 million in cash and cash equivalents and $1,065 million of additional available borrowings under HD Supply, Inc.’s senior asset-backed lending facility, based on qualifying inventory and receivables.

Second-Quarter 2016 Outlook

Despite the slow start to the second quarter, the company affirms its expectations of 300 basis points in excess of market and 1.5x to 2.0x operating leverage for fiscal year 2016.  Adjusted for Interior Solutions reflected as discontinued operations, the company anticipates Net sales in the second quarter of fiscal 2016 to be in the range of $2,000 million to $2,050 million, Adjusted EBITDA in the range of $270 million to $280 million, and Adjusted net income per diluted share in the range of $0.85 to $0.90.


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