Core & Main 3Q Sales Tick Up, but Mostly Flat - Modern Distribution Management

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Core & Main 3Q Sales Tick Up, but Mostly Flat

Waterworks and industrial supplies distributor Core & Main's 3Q earnings increased 0.5% due to acquisitions offset by lower end-market volumes.
Core & Main HQ

St. Louis-based waterworks and industrial supplies distributor Core & Main‘s third-quarter earnings in 2023 showed net sales increased 0.5% to $1.83 billion compared to same quarter in 2022 due to acquisitions partially offset by comparably lower end-market volumes.

In the quarter, Core & Main acquired Enviroscape in Ohio, J.W. D’Angelo in Southern California, and Granite Water Works in Minnesota.

Compared to last quarter, net sales remained relatively flat next to 2Q 2023‘s $1.86 billion.

Net Sales by Product in 3Q 2023

  • Declines in pipes, valves and fittings sales were due to lower end-market volume partially offset by acquisitions.
  • Growth in storm drainage product sales benefited from higher volume primarily related to acquisitions.
  • Fire protection product sales declined due to lower selling prices and lower volume on steel pipe.
  • Meter product sales benefited from acquisitions and higher volumes due to an increasing adoption of smart meter technology.

Net profit in the quarter decreased 11.2% compared to 3Q 2022, coming in at $158 million. The distributor reported adjusted EBITDA of $260 million, a 5.5% decrease compared the same quarter in 2022. But the number was on the high end of Core & Main’s preliminary results, which predicted EBITDA could be as low as $257 million and as high as  $263 million.

“Gross margins were (27.0%) 50 basis points lower than last year as inventory costs continue to catch up with current market prices, but we are pleased to see gross margins sustain at higher levels as we work to drive our margin initiatives through our nationwide branch network,” Core & Main CEO Steve LeClair said in a Dec. 5 news release.

Financial 2023 Outlook
  • Narrowing expectation for net sales to be in the range of $6.65 to $6.75 billion.
  • Raising expectation for Adjusted EBITDA to be in the range of $890 to $910 million, due to strong margin performance in the third quarter and the company’s confidence in the ability to better sustain margins through the end of the year.
  • Raising our expectation for operating cash flow conversion to be in the range of 110% to 115% of Adjusted EBITDA as a result of inventory optimization efforts.

“We expect to continue deploying capital on initiatives that will result in accelerated growth, including executing on our robust M&A pipeline and delivering on our organic growth initiatives,” LeClair said.

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