HD Supply Net Sales Up in Q1

ATLANTA — HD Supply Holdings, Inc. today reported Net sales of $1.5 billion for the first quarter of fiscal 2019 ended May 5, 2019, an increase of $104 million, or 7.5 percent, as compared to the first quarter of fiscal 2018. Organic sales growth for the first quarter of fiscal 2019 was 5.8 percent, as compared to the first quarter of fiscal 2018.

“The team overcame significant unfavorable weather in February to deliver on our promises during the first quarter of 2019,” stated Joe DeAngelo, Chairman and CEO of HD Supply. “In this current dynamic environment, we are intensely focused on what we can control, delivering profitable growth and executing on our capital allocation strategy.”

Gross profit increased $33 million, or 6.0 percent, to $585 million for the first quarter of fiscal 2019, as compared to $552 million for the first quarter of fiscal 2018. Gross profit was 39.2 percent of Net sales for the first quarter of fiscal 2019, down approximately 50 basis points from 39.7 percent for the first quarter of fiscal 2018.

Operating income increased $19 million, or 12.6 percent, to $170 million for the first quarter of fiscal 2019, as compared to $151 million for the first quarter of fiscal 2018. Operating income was 11.4 percent of Net sales for the first quarter of fiscal 2019, up approximately 50 basis points from 10.9 percent for the first quarter of fiscal 2018.

Net income increased $18 million, or 20.2 percent, to $107 million for the first quarter of fiscal 2019, as compared to $89 million for the first quarter of fiscal 2018. Net income per diluted share increased $0.15, or 31.3 percent, to $0.63 in the first quarter of fiscal 2019, as compared to $0.48 in the first quarter of fiscal 2018.

Adjusted EBITDA increased $13 million, or 6.8 percent, to $203 million for the first quarter of fiscal 2019, as compared to $190 million for the first quarter of fiscal 2018. Adjusted EBITDA was 13.6 percent of Net sales for the first quarter of fiscal 2019, down approximately 10 basis points from 13.7 percent for the first quarter of fiscal 2018.

Adjusted net income increased $13 million, or 10.0 percent, to $143 million for the first quarter of fiscal 2019, as compared to $130 million for the first quarter of fiscal 2018. Adjusted net income per diluted share increased $0.14, or 20.0 percent to $0.84 in the first quarter of fiscal 2019, as compared to $0.70 in the first quarter of fiscal 2018.

As of May 5, 2019, HD Supply’s combined liquidity of $580 million was comprised of $40 million in cash and cash equivalents and $540 million of additional available borrowings (excluding $6 million of borrowings on available cash balances) under HD Supply, Inc.’s senior asset-based lending facility, based on qualifying inventory and receivables.

Business Unit Performance

Facilities Maintenance

Net sales increased $49 million, or 6.8 percent, to $772 million in the first quarter of fiscal 2019, as compared to $723 million for the first quarter of fiscal 2018. Adjusted EBITDA increased $11 million, or 8.9 percent, to $134 million for the first quarter of fiscal 2019, as compared to $123 million for the first quarter of fiscal 2018. Adjusted EBITDA was 17.4 percent of Net sales for the first quarter of fiscal 2019, up approximately 40 basis points from 17.0 percent for the first quarter of fiscal 2018.

Construction & Industrial

Net sales increased $55 million, or 8.3 percent, to $721 million in the first quarter of fiscal 2019, as compared to $666 million for the first quarter of fiscal 2018. Organic sales growth was approximately 4.7 percent in the first quarter of fiscal 2019 as compared to the first quarter of fiscal 2018. Adjusted EBITDA increased $2 million, or 3.0 percent, to $69 million for the first quarter of fiscal 2019, as compared to $67 million for the first quarter of fiscal 2018. Adjusted EBITDA was 9.6 percent of Net sales for the first quarter of fiscal 2019, down approximately 50 basis points from 10.1 percent for the first quarter of fiscal 2018.

First-Quarter Monthly Sales Performance

Net sales for February, March and April of fiscal 2019 were $423 million, $460 million and $610 million, respectively. There were 20 selling days in February, 20 selling days in March and 25 selling days in April in both fiscal 2019 and fiscal 2018. Average year-over-year daily sales growth for February, March and April was 8.1 percent, 8.8 percent and 6.1 percent, respectively. On an organic basis, average year-over-year daily sales growth for February and March was 2.2 percent and 8.6 percent respectively. April did not include any non-organic sales.

Preliminary May Sales Results

Preliminary Net sales in May 2019 were approximately $464 million, which represents year-over-year average daily sales growth of approximately 0.2 percent. Preliminary May year-over-year average daily sales by business segment was a 2.4 percent decline in Facilities Maintenance and a 2.8 percent increase in Construction & Industrial. There were 19 selling days in May of fiscal 2019 and 20 selling days in May of fiscal 2018.

Facilities Maintenance’s May sales were unfavorably impacted by weak HVAC sales due to unusually cool weather, a temporary disruption in order fulfillment in the Southeast due to a vendor software issue in our Atlanta distribution center and a calendar shift due to 2018’s 53-week year.

Second-Quarter 2019 and Fiscal Year 2019 Outlook

In fiscal year 2019, the company continues to estimate end market growth of approximately 2-3 percent.