Core & Main, Inc. Class A ((CNM)) has held its Q4 earnings call. Read on for the main highlights of the call.
Core & Main, Inc. Reports Record Sales and Strategic Growth in Fiscal 2024
Core & Main, Inc. celebrated a robust fiscal 2024, marked by record sales and successful strategic initiatives, including mergers and acquisitions (M&A) and market share expansion. Despite facing challenges in gross margin and increased interest expenses, the company remains optimistic about its growth trajectory. The planned executive transition is viewed positively, ensuring continuity in leadership, while the municipal market continues to provide a solid foundation for future growth.
Record Net Sales and Growth
Core & Main achieved a remarkable milestone in fiscal 2024 with record net sales surpassing $7.4 billion. This achievement marks the 15th consecutive year of positive sales growth, highlighted by an 18% increase in fourth-quarter sales. The company’s consistent performance underscores its strong market position and effective growth strategies.
Strong Cash Flow and Share Repurchase
The company reported robust operating cash flow of over $620 million, demonstrating its financial strength. In a move to return value to shareholders, Core & Main repurchased 4 million shares, amounting to $176 million, reflecting its commitment to shareholder returns.
Successful M&A Strategy
Core & Main’s strategic focus on acquisitions has been a key driver of its growth. Since 2017, the company has completed over 40 acquisitions, adding more than $600 million in annual sales in 2024 alone. The company maintains a healthy pipeline of potential deals for 2025, indicating continued expansion through strategic acquisitions.
Municipal Market Strength
The municipal market remains a pillar of strength for Core & Main, with resilient spending on water infrastructure driven by essential investments. The company projects low single-digit growth in this sector for 2025, highlighting its importance to Core & Main’s overall growth strategy.
Executive Transition and Leadership Continuity
CEO Steve LeClair announced a planned transition, with Mark Witkowski set to take over as CEO and Robyn Bradbury as CFO. This transition is expected to ensure leadership continuity, providing stability and confidence to stakeholders.
Slight Decline in Gross Margin
Core & Main experienced a slight decline in gross margin for fiscal 2024, decreasing by 50 basis points to 26.6%. This was attributed to a higher average cost of inventory compared to the previous year, presenting a challenge that the company aims to address moving forward.
Interest Expense Increase
The company reported an increase in interest expense for fiscal 2024, rising to $142 million from $81 million the previous year. This increase was due to higher average borrowings, reflecting the company’s strategic investments and growth initiatives.
Uncertainty in Pricing and Tariffs
Tariffs continue to create uncertainty, potentially limiting end market growth. However, they are expected to be neutral to slightly positive for pricing and gross margins, presenting a mixed outlook for the company’s pricing strategy.
Forward-Looking Guidance
Looking ahead to fiscal 2025, Core & Main provided optimistic guidance, expecting net sales to range from $7.6 billion to $7.8 billion, reflecting growth of 2% to 5%. Adjusted EBITDA is anticipated to be between $950 million and $1 billion, with margins ranging from 12.5% to 12.8%. The company plans to drive gross margin expansion through private label, sourcing optimization, and pricing initiatives, while maintaining a balanced market exposure and continuing its acquisition strategy.
In summary, Core & Main, Inc. has demonstrated strong performance in fiscal 2024, with record sales and strategic growth initiatives. Despite challenges in gross margin and interest expenses, the company remains well-positioned for future growth, supported by a resilient municipal market and a strategic focus on acquisitions. The planned executive transition is expected to ensure leadership continuity, further bolstering confidence in the company’s future prospects.