HD Supply Posts Q2 Earnings
Reports 9 percent net sales increase and 18 percent adjusted EBITDA growth versus 2013.
- Net Sales increased 9 percent to $2,447 million
- Operating Income improved 22 percent to $186 million
- Adjusted EBITDA increased 18 percent to $258 million
- Adjusted Net Income per diluted share increased 117 percent to $0.51 (Net Income per diluted share of $0.24)
HD Supply Holdings, Inc. today reported Net sales for the second quarter of fiscal 2014 ended August 3, 2014 of $2.4 billion, an increase of $210 million, or 9 percent, as compared to the second quarter of fiscal 2013.
The second quarter performance represents the 17th consecutive quarter of year-over-year average daily sales growth. The company believes its sales performance represents growth of approximately 600 basis points in excess of its market growth estimate.
“I am very pleased with our execution in the second quarter,” stated Joe DeAngelo, CEO of HD Supply. “We delivered strong organic sales and earnings growth and remain cautiously optimistic about what seems to be improving end markets."
Gross profit increased $65 million, or 10 percent, to $722 million for the second quarter of fiscal 2014 compared to $657 million for the second quarter of fiscal 2013. Gross profit was 29.5 percent of Net sales for the second quarter of fiscal 2014, up approximately 10 basis points from 29.4 percent of Net sales for the second quarter of fiscal 2013.
Gross profit improvement was driven by execution of the company’s category management initiatives, partially offset by the competitive environment and mix of products and services.
Operating income increased $34 million, or 22 percent, to $186 million for the second quarter of fiscal 2014 compared to $152 million for the second quarter of fiscal 2013.
Operating income as a percentage of Net sales increased approximately 80 basis points during the second quarter of fiscal 2014 as compared to the second quarter of fiscal 2013.
The improvement was primarily driven by a reduction in Selling, general and administrative expenses as a percentage of Net sales and improvements in gross margins.
Adjusted EBITDA increased $39 million, or 18 percent, to $258 million for the second quarter of fiscal 2014 compared to $219 million for the second quarter of fiscal 2013.
Each of the company's reportable segments reported an increase in Adjusted EBITDA. Adjusted EBITDA as a percentage of Net sales increased approximately 70 basis points to 11 percent in the second quarter of fiscal 2014 as compared to 10 percent in the second quarter of fiscal 2013.
Net income increased $120 million to $48 million for the second quarter of fiscal 2014 as compared to a Net loss of $72 million in the second quarter of fiscal 2013. The improvement in Net income is attributable to higher operating income and lower interest expense in the second quarter of fiscal 2014 as compared to the second quarter of fiscal 2013. In addition, the second quarter of fiscal 2013 included a loss on extinguishment of debt.
Net income per diluted share was $0.24 in the second quarter of fiscal 2014, as compared to a Net loss per diluted share of $0.47 in the second quarter of fiscal 2013.
Adjusted net income increased $65 million to $102 million for the second quarter of fiscal 2014 as compared to an Adjusted net income of $37 million in the second quarter of fiscal 2013. The increase in Adjusted net income is attributable to sales growth, improving gross margins, and a reduction in interest expense. Adjusted net income per diluted share was $0.51 in the second quarter of fiscal 2014, as compared to an Adjusted net income of per diluted share $0.23 in the second quarter of fiscal 2013.
Business Unit Performance
Facilities Maintenance
Net sales increased $48 million, or 8 percent, to $686 million in the second quarter of fiscal 2014 as compared to $638 million in the second quarter of fiscal 2013. Adjusted EBITDA increased $14 million, or 11 percent, to $139 million during the second quarter of fiscal 2014 as compared to $125 million in the second quarter of fiscal 2013. Adjusted EBITDA as a percentage of Net sales increased approximately 70 basis points in the second quarter of fiscal 2014 as compared to the second quarter of fiscal 2013.
Waterworks
Net sales increased $64 million, or 11 percent, to $665 million in the second quarter of fiscal 2014 as compared to $601 million in the second quarter of fiscal 2013. Adjusted EBITDA increased $7 million, or 14 percent, to $57 million during the second quarter of fiscal 2014 as compared to $50 million in the second quarter of fiscal 2013. Adjusted EBITDA as a percentage of Net sales increased approximately 30 basis points in the second quarter of fiscal 2014 as compared to the second quarter of fiscal 2013.
Power Solutions
Net sales increased $32 million, or 7 percent, to $488 million in the second quarter of fiscal 2014, as compared to $456 million in the second quarter of fiscal 2013. Adjusted EBITDA increased $3 million, or 17 percent, to $21 million during the second quarter of fiscal 2014 as compared to $18 million in the second quarter of fiscal 2013. Adjusted EBITDA as a percentage of Net sales increased approximately 40 basis points in the second quarter of fiscal 2014 as compared to the second quarter of fiscal 2013.
Construction & Industrial - White Cap
Net sales increased $53 million, or 16 percent, to $389 million in the second quarter of fiscal 2014 as compared to $336 million in the second quarter of fiscal 2013. Adjusted EBITDA increased $9 million, or 38 percent, to $33 million during the second quarter of fiscal 2014 as compared to $24 million in the second quarter of fiscal 2013. Adjusted EBITDA as a percentage of Net sales increased approximately 140 basis points during the second quarter of fiscal 2014 as compared to the second quarter of fiscal 2013.
Year-to-Date Results
Net sales for the first half of fiscal 2014 increased $323 million, or 8 percent, to $4.6 billion, as compared to $4.3 billion the first half of fiscal 2013. Gross profit for the first half of fiscal 2014 increased by $103 million, or 8 percent, to $1.4 billion compared to $1.3 billion for the first half of fiscal 2013. Gross profit for the first half of fiscal 2014 was 29.4 percent of Net sales versus 29.2 percent of Net sales for the first half of fiscal 2013.
Operating income for the first half of fiscal 2014 increased $52 million, or 21 percent, to $305 million compared to operating income of $253 million for the first half of fiscal 2013.
Adjusted EBITDA for the first half of fiscal 2014 increased $64 million, or 17 percent, to $448 million compared to $384 million in the first half of fiscal 2013. Adjusted EBITDA for the first half of fiscal 2014 increased to 9.7 percent of Net sales versus 9.0 percent of Net sales for the first half of fiscal 2013.
Net income for the first half of fiscal 2014 increased $239 million to $36 million compared to a Net loss of $203 million for the first half of fiscal 2013. Net income per diluted share was $0.18 in the first half of fiscal 2014, as compared to a Net loss per diluted share of $1.43 in the first half of fiscal 2013.
Adjusted net income for the first half of fiscal 2014 increased $118 million to $141 million compared to an Adjusted net income of $23 million in the first half of fiscal 2013. Adjusted net income per diluted share for the first half of fiscal 2014 was $0.71 as compared to an Adjusted net income per diluted share of $0.16 in the first half of fiscal 2013.
Second-Quarter Monthly Sales Performance
Net sales for May, June and July were $712 million, $790 million and $945 million, respectively. There were 19 selling days in May, 20 selling days in June and 24 selling days in July. Average year-over-year daily sales growth for May, June and July were 9.6 percent, 10.1 percent and 8.6 percent, respectively.
Preliminary August Sales
Preliminary Net sales in August were $785 million. There were 20 selling days in August and average daily sales were up 10.1 percent versus prior year. Preliminary August year-over-year average daily sales growth by business is Facilities Maintenance 9.2 percent, Waterworks 10.2 percent, Power Solutions 7.4 percent, and Construction & Industrial – White Cap 16.8 percent.
2014 Third Quarter Outlook
The company anticipates Net sales in the third quarter of fiscal 2014 to be in the range of $2,425 million to $2,500 million, Adjusted EBITDA in the range of $255 million to $265 million, and Adjusted net income per diluted share in the range of $0.48 to $0.55. The third quarter fiscal 2014 Adjusted net income per diluted share range assumes a fully diluted weighted average share count of 201 million.
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