Core & Main Reports Q1 FY23 Sales Dip But Beats EPS Estimates; Ups Fiscal 2023 Outlook

Core & Main Inc CNM reported a first-quarter FY23 sales decline of 1.5% year-on-year, to $1.57 billion, missing the consensus of $1.60 billion.

  • EPS of $0.50 beat the consensus of $0.46.
  • Gross profit increased 4.3% Y/Y to $439 million, and the margin expanded by 155 bps to 27.9%. The operating margin was 11.5%, up by 25 bps.
  • Net cash provided by operating activities for the quarter totaled $120 million, compared to cash used of $37 million in 1Q22. The improvement was driven by a smaller investment in inventory due to more predictable product lead times in FY23.
  • At the end of Q1, inventories were $1.03 billion, down 1.6% sequentially.
  • Adjusted EBITDA was flat YoY at $220 million, and the margin expanded by 30 bps to 14%.
  • As of April 30, 2023, cash and cash equivalents totaled $1 million.
  • Net debt was $1.6 billion. Debt Leverage was 1.7x, an improvement of 0.5x from May 1, 2022.
  • "We expect net sales for the year to be slightly higher than fiscal 2022, and we are pleased that our end markets have remained resilient. Given our recent acquisitions and strong margin performance in the first quarter, we are raising our expectations for fiscal 2023 net sales and Adjusted EBITDA," commented Steve LeClair, chief executive officer of Core & Main.
  • "As we progress through the year, we will continue to focus on organic and inorganic growth opportunities, margin expansion and operating cash conversion through inventory optimization," added LeClair.
  • FY23 Outlook: The company now expects net sales of $6.6 billion-$6.9 billion (prior view $6.455 billion-$6.875 billion) versus the consensus of $6.62 billion.
  • CNM sees Adjusted EBITDA of $820 million-$880 million (prior $785 million to $865 million).

Price Action: CNM shares are trading higher by 5.5% at $28.71 at last check on Tuesday.

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