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HD Supply Releases 3Q 2017 Results, Beats Expectations

HD Supply Releases 3Q 2017 Results, Beats Expectations

ATLANTA — HD Supply Holdings, Inc. today reported Net sales of $1.4 billion for the third quarter of fiscal 2017 ended October 29, 2017, an increase of $95 million, or 7.5 percent, as compared to the third quarter of fiscal 2016.

“I am proud of the team’s performance in the third quarter.  We delivered strong overall results including 7.5 percent sales growth, which allowed us to raise our full year guidance. The team is committed to delivering long term profitable growth in excess of market and improved operating leverage,” stated Joe DeAngelo, Chairman, President & CEO of HD Supply.

Gross profit increased $30 million, or 5.9 percent, to $542 million for the third quarter of fiscal 2017 as compared to $512 million for the third quarter of fiscal 2016. Gross profit was 39.6 percent of Net sales for the third quarter of fiscal 2017, down approximately 60 basis points from 40.2 percent of Net sales for third quarter of fiscal 2016.

Operating income increased $23 million, or 14.5 percent, to $182 million for the third quarter of fiscal 2017 as compared to $159 million for the third quarter of fiscal 2016. Operating income as a percentage of Net sales was 13.3 percent for the third quarter of fiscal 2017, an increase of approximately 80 basis points from 12.5 percent for the third quarter of fiscal 2016.

Net income increased $392 million to $452 million for the third quarter of fiscal 2017 as compared to $60 million for the third quarter of fiscal 2016. The increase in Net income was primarily due to the gain on the sale of our Waterworks business. Net income per diluted share increased $2.12 to $2.42 for the third quarter of fiscal 2017 as compared to $0.30 for the third quarter of fiscal 2016.

Adjusted EBITDA increased $26 million, or 13.8 percent, to $214 million for the third quarter of fiscal 2017 as compared to $188 million for the third quarter of fiscal 2016. Adjusted EBITDA as a percentage of Net sales was 15.6 percent for the third quarter of fiscal 2017, increasing approximately 90 basis points from 14.7 percent for the third quarter of fiscal 2016.

Adjusted net income increased $55 million, or 58.5 percent, to $149 million for the third quarter of fiscal 2017 as compared to $94 million for the third quarter of fiscal 2016.  Adjusted net income per diluted share increased 70.2 percent to $0.80 for the third quarter of fiscal 2017, as compared to $0.47 for the third quarter of fiscal 2016.

As of October 29, 2017, HD Supply’s combined liquidity of approximately $1.2 billion was comprised of $461 million in cash and cash equivalents and $744 million of additional available borrowings under HD Supply (HDS), Inc.’s (“HDS”) senior asset-backed lending facility, based on qualifying inventory and receivables.

Business Unit Performance

Facilities Maintenance

Net sales increased $30 million, or 4.1 percent, to $754 million for the third quarter of fiscal 2017 as compared to $724 million for the third quarter of fiscal 2016.  Adjusted EBITDA increased $13 million, or 9.3 percent, to $153 million for the third quarter of fiscal 2017 as compared to $140 million for the third quarter of fiscal 2016.  This represents an operating leverage of 2.3x. Adjusted EBITDA as a percentage of Net sales was 20.3 percent for the third quarter of fiscal 2017, increasing approximately 100 basis points from 19.3 percent for the third quarter of fiscal 2016.

Construction & Industrial

Net sales increased $65 million, or 11.8 percent, to $617 million for the third quarter of fiscal 2017 as compared to $552 million for the third quarter of fiscal 2016.  Adjusted EBITDA increased $9 million, or 13.4 percent, to $76 million for the third quarter of fiscal 2017 as compared to $67 million for the third quarter of fiscal 2016. This represents an operating leverage of 1.1x.  Adjusted EBITDA as a percentage of Net sales was 12.3 percent for the third quarter of fiscal 2017, an increase of approximately 20 basis points from 12.1 percent for the third quarter of fiscal 2016.

Third-Quarter Monthly Sales Performance

Net sales for August, September and October of fiscal 2017 were $436 million, $403 million and $531 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 of fiscal 2017 was 6.7 percent, 5.2 percent and 10.0 percent, respectively.

Preliminary November Sales Results

Preliminary Net sales in November were approximately $372 million, which represents year-over-year average daily sales growth of approximately 9.8 percent. Preliminary November year-over-year average daily sales growth for Facilities Maintenance was approximately 4.3 percent and for Construction & Industrial was approximately 16.4 percent.  There were 18 selling days in both November 2017 and November 2016.

Fourth-Quarter 2017 Outlook

For the fourth quarter of fiscal 2017, Net sales are anticipated to be in the range of $1,142 million and $1,182 million, Adjusted EBITDA1 in the range of $135 million and $147 million and Adjusted net income per diluted share1 in the range of $0.41 and $0.47.  Adjusted net income per diluted share range assumes a fully diluted weighted average share count of approximately 186 million.  The company will provide further specifics on its outlook during the third-quarter fiscal 2017 earnings conference call and in the earnings call presentation materials.

For the full year fiscal 2017, Net sales are anticipated to be in the range of $5,080 million and $5,120 million, Adjusted EBITDA1 in the range of $714 million and $726 million and Adjusted net income per diluted share1 in the range of $2.23 and $2.29.  Adjusted net income per diluted share range assumes a fully diluted weighted average share count of approximately 194 million.

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