CORE - Earnings call transcript Q1 2018

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Operator

Welcome to the Core-Mark 2018 First Quarter Investor Conference Call. My name is Jay, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. the to turn now will call Ms. over I Draper. Milton Ms. Draper, you begin. may

Milton Draper

to operator. call. to I you, welcome would investor Thank XXXX like everyone quarter Core-Mark’s first

me designated Chief Officer; Officer. Chief President Perkins, are Executive Chief Scott and and McPherson; our Joining Executive Officer Operating today Thomas and our

our earnings have also press issued this morning. Tachouet, release our Officer on Officer and Chief was We Accounting Financial the Miller, Matt Chris Chief call. Core-Mark’s earlier

discussion the the to find on of include Investor non-GAAP Relations and copy Today’s non-GAAP GAAP financial reconciliation under can You measures in our financial tab. release. is it press will these A GAAP both included website measures. earnings the of

periodically and We XX-K We to differ may results also now statements we to discussing Tom uncertainties refer over forward-looking specifically documents from risks cause our our These are to XX-Qs filed risk turn future current with management’s SEC, you actual that will materially discussion results. subject I’ll of to call expectations. affect forward-looking the that our the be statements. the for and Perkins. may have

Thomas Perkins

you grow and and EBITDA our is would headwinds. significant and as Good rate result XXXX able the thank conference sales call. morning us I joining first characterize were we some despite solid our quarter's for topline to quarter on healthy our

the delivery a well. is percentage their warehouses our quarter annual in of We are are good expense benefited divisions encouraged quarter for from by and performing that in accomplishment, XXXX the but small improvements first only EBITDA. we all that and know represents significant the news struggled The two

not sales they We The perform are carton optimistic headwinds and quarter are face This environment. accelerated nicotine retail unrelated. most indicative in products. the in in continued through normal are results the trends was We vapor growth of are by these quarter these season. carton than other that weakness these continued encouraged early was sales. the two tempered in believe headwind we challenging entirely decline steeper do accelerate The significant busy wins to will with in by how a and

the We are seeing will signs carton decline hearing and moderate. manufacturers that from

While nicotine and hurt cartons trends products very rapidly. these in ever

approach We I initiatives. decline to will proper provide have would adjustments make to carton and in on our our on that focused every strategic have pricing like I given to customers serves our strategies. it Walmart circumstances. these been confidence an update the its how

totaled environment. in and a profit resulting cigarette about VCI replace profitability retailers offset Our These despite they retail carton fresh enhanced to pressure from volume, $XX having our sales strategic a VCI soft initiatives two and as transition C-Store the declines. and Kroger can the incremental to importance are fresh million, continuing from great

the and while providing Our focused supply cost out customers on customers food should be chain, of items. with also in-demand services fresh the taking

We two take that can market are of also share leader in these our to market for and additional advantage the are refining we customers that competitive categories. alternative nicotine use programs our so

our more products partners FMI as than we the acceptance marketing business role our rate. a stores. Our and XXXX, Core carrying data In quarter all first to Solutions of aspects delivered ensure analytics, plans right continues over whose XX% virtually greater becomes their X,XXX grows the are customers retail to of Group, critical in with

to is stores a in serve goal Our X,XXX XXXX.

in a do stores that to that in participated compared not. reduction rates see surveys We churn those continue to with

essential This strategy significantly sales do remains not stores incremental and In stores non-cigarette faster for to addition, the and grow non-cigarette same-store pursued are XXXX. participate. for sales participating that in growth

at compete, the in industry. date was in reaffirmed markets Our which we key continued of our be differentiator to next strategies recent greatest which the

prices, the would group in disposable on including e-commerce. business findings in factors XXXX. like income tendered our were us. I Much fuel some of the in increase decline identified, industry impact that Executive and briefly submit, store income this the COSMA date in shared focus placed from Some was of of industry of consumer, decline Senior Many next the with discuss the of the to lower

grow stores half the and XXXX. to point especially data in Some QSRs of declines dollar the card from accelerated latter certainly of

[indiscernible]. key which Our offer knowledgeable the broad customers are makes that core was food takeaway execution outperform providing knitting stores focused of service will industry, fresh about are a space our on and strategies

it think third headwinds was the year phase industry. the in for is XXXX. I the the The industry [indiscernible] year profits in despite worth consecutive noting of

ability with you to partner our as our the take interest customers are a I I challenging to this solutions am all to funded your for place over plus is to working are improve in improve and long my history the have middle believe relevancy key of to resiliency. will CEO. very you the to investment market. community this that we And of I appreciate would like success. opportunity future will of sustainable all our optimistic the I I in support I Scott, know strategies given last that, take have story last over environment. our me turn the Our to for investor call with position future I with every the ideal in with position very five call. this about years. profitability enjoyed how advice strategies confidence this competitive and long-term the given and Scott’s the be performance Company's in excellent retail C-Store and continue well to operators right in the and have as even Core-Mark organization

Scott McPherson

XX-year employees your the by Sales new I $X.X leadership at On of X,XXX touching including billion contributions driven friendship on the market X% net career. the by share Iowa financial to the from highlights and for increased during in quarter. quarter team approximately begin and your wins division. our executive Core-Mark, the Thank my your here we you, remarks will behalf appreciate Tom.

toward has product One shift categories. noteworthy the of developments our most been non-cigarette mix in the

non-cigarette sales the by XX% total quarter, well of boost the contributions sales increase the new The from in to Walmart. our quarter compared as driven the year. same last was as represented For Iowa sales from in division robust XX% XX% non-cigarette

improving In our addition, products pace grow tobacco experienced continues if the with same-store overall each X% carton X.X% categories. same-store from X% X.X% Cigarette sales coming decline fresh in carton steepest with in at a for vapor or the was healthy by exclude sales decline others quarter. significant the declines with to non-cigarette month California down sales slightly. you growth growth hampered January

contributed declines. brands starting results positive to As the the Tom the to that manufacturer’s to is accelerated have the of efforts see indicated, reenergize industry key

and our increased shortcomings and upon summer delivery the line expense costs first expense XX basis our delivery operating rather a the warehouse in sales success our attributed increase. basis were increased warehouse Transportation perspective, throughput Cost be had for and and by [indiscernible] to XX% fuel leverage XXXX, to XX%, into addition resources up And and transportation a which to primarily optimization. Iowa in to In for over significant we and as million quarter a as quarter expenses. well our critical to the sales and increase $XX indication the on quarter. dedicated shift a for of the of us by percent our $XX.X challenge cost points staffing delivery be significant distribution Moving of percent at is efficiencies. a warehouse of division and leverage will point warehouse position our costs. We've by million XX the focusing Overall, was of XXXX. a better us to experienced approximately the the ramping our looking to we for rising the from limited and million warehouse leverage, summer, driver profit, including largest quarter mix, account, driven XXXX. our at of the time able Without gross a in in in same positions $XX.X remaining continued bottom taking came in cost quarter quarter From improvement compared the we and EBITDA season. which overrun reduce expense

of look forward would to to the we a on success. the balance importance our year, few I critical As like areas of touch to

earlier, the the improve through on and I warehouse season. execute summer our to as continue we transportation in to to have gained alluded the momentum plans First,

the know delivery and of warehouse majority our during period controlling expense delivered and months you six earnings critical. vast As next are is over this the

as I are first fresh capitalizing Next despite by would in filing from and we category replacing as sales such service, income market carton in good small quarter, with key. plan, and from nearly significant grew top locations. ability the decline In on mind diligently opportunities headwinds. growth XXX EBITDA closing, working food of chain nicotine includes pricing categories the perspective, addressing key we quarter our model our focusing alternatives to evolving on which wins first and is and an continue share and was retailers say independent our In our

We both with existing key market focus new with and smaller integral we succeed retailers are and on our continue strategies ensuring share of to aspect gaining how customers. an

in Chris efficiencies also to are that, and our while headwinds, our industry will CFO. guidance. well bringing we we to with operations, and I retail our are call positioned believe We turn competition driving focused our now partners to deliver in company the over outmaneuver are the XXXX on some the value our And facing Miller,

Christopher Miller

a by or net our of basis due year. million the for to for which per reviewing to start Thanks, profit over a per reported $X.X loss million quarter. first Scott. was XXXX compared the quarter on earnings in The or last $X.XX $X.XX share LIFO largely $X.X increased We expense, the million loss first share quarter. a GAAP of I'll $X.X

the $X.XX LIFO, last quarter with Excluding for earnings year. compared per our $X.XX were share diluted

items other to of the to LIFO, are the EPS addition point there impact In for comparability quarter. like which two I'd out,

$X.X the last first not the or including was non-cigarette commodities results quarter. benefit expense, with to per quarter significant per share for and grew $X.XX tax billion year's would year's million EPS We of million for two in last during $X.X $X.X $X.XX sales. above LIFO this quarter first per items in non-cigarette the year, first share, in primarily reoccur last progress the of did made income with expense this which increase the increasing increase compared interest these $X.XX have sales number compared year, an X.X% second XX% sales billion $X.XX Total in First in last share Adjusting a or by year. and year. our $X.X driven been for quarter

cigarette of strategies category, Walmart. the in the The fresh in Iowa same-store growth addition remain addition with in growth core sales addition strong division increases sales. impacted $X.X increase positively was Food the Iowa OTP The The current sales attributable in and along and the increased of to were card by pricing. mostly grew in division of was impacted billion. quarter in one Candy X% and X% in a categories California with trend increase growth growth by which XX%, Our new sales. sales quarter. sales XX.X%. modestly an increasing additional division. XX.X% excludes through These as XX.X% and last for we our also showed quarter. loss from by and our XX.X% $XXX.X revenue Sales improve by by strong same-store profit to $XXX did excise slight the to holding our quarter LIFO category profit led increase grew cigarette Walmart increases profit slightly Iowa positive was decline in expense. of sales gross significantly in same-store $XXX.X was and the of XXXX. taxes LIFO of sales of in driven the expense first basis, is the from encouraging. million offset offset which decline increase partially on in which million lower quarter. to well April the compared gross this inventory was was business Remaining million XX.X% the increased and profit, from Kroger remaining year's growth to sequentially the increased decline moved as non-cigarette the higher The an gross quarter, Gross contribution The much or In by as in games the the benefited

remaining category, by gross overall quarter the The combined given million XX% Company's of addition in of the increase X.X% the driven last to this million, margin resulting profit increased gross or due Looking the approximately profit while to the carton cigarette to profit, remaining in carton first $X.X partially by $XXX at its was mix gross decline year. mix our to decreased was remaining gross total quarter, from first XX% shift profit XX% Non-cigarette non-cigarette the Iowa non-cigarettes, remaining higher non-cigarettes year. sales. of primarily XXXXs division compared compared sharper in decline sales with cartons with

effects mix the gross side primarily addition to contribution the mix sales margins other decline increases manufacturer expanded lower margin taxes prices. due sales decrease margin alternative sales nicotine the the remaining in was shifts a higher compressing in shift mentioned. had of points. which margin due which agreement quarter positive from margin offset points the remaining basis profit points of to and products X the non-cigarette basis profit margins. On profit the the gross remaining from carries margin the of Walmart XX Cigarette to business basis by division, and commodities excise than Iowa gross previously OTP XX Kroger lower expiration of our The in Non-cigarettes

a This profile further As are penetration Tom and large of sales by goal Scott is XXXX. for discussed population. on own our improving margin the independently we retailer key convenience focused

to in the is in independent convenience makes approximately two-thirds market balance mix which large our business additional the and stores this capture share of strategy up U.S. Our

operating turning non-cigarette expenses million were OpEx. Total the quarter due volume to with $XX expenses. of X.X% for and the the Iowa addition sales delivery the XXXX. of $XXX.X in Now sales quarter first approximately X.X% compared higher expenses to increase the in the to net increased division, in quarter Operating primarily of million

had of in As a a XX these new basis change XX improved points. $X.X approximate SG&A metric. $X.X million effect mix basis excluding increased sales The or gross in a as profit division. X% or compressing total uptick percentage basis remaining this an point on represents OpEx growth our expenses This expenses of X point percent million sales. approximately

remaining of profit points. percentage basis a expenses approximately XX gross As SG&A improved

Our with $X.X year. income from million $X.X QX was operations or EBIT compared last million for

approximately to last increased versus EBIT $X.X expense million million XX% LIFO $X.X Excluding year.

$XX.X manufacture Our quarter. operations, in free year software million ago which define for last our the and approximately flow At $XXX.X to in was net flow primarily year. of and million due year million of less increases carton to inventory was March year $XXX cash Manufacturer's The purchases cigarettes. increase net was timing on of made compared an $XXX $X.XX cash we price price price CapEx this end with in free from we announced cash anticipation the this increases. the capitalized of debt long-term million to compared related decrease as cigarette included mid-March

into the quarter the the increase mind paydown we cigarette over sold extra March the price gains March in expand to million We credit late primarily during Given the inventory were through working level $X from we most capital million depending of the quarter. significantly approximately second of our April contract in facility our able debt holding on Keep time approximately from left $XXX will carryover and through requirements. to our increase. have tends as

million the the plan. $X the it levels of of per our on to debt to million $XXX million was price our approximately $XX spending year the We remaining this QX we Capital end $XX million quarter range be for For used we $XX approximately million the $XXX less on have cash from share low at expect and to shares million an end. under high repurchase quarter full-year. during average or to authorized $X repurchase and in approximately

For the spent million quarter cash we dividend on $X.X payments.

share rate and the EBITDA a $XX.X may our reported billion to in we $XX.X per expected have of an and $X.XX we and dollar to you and Diluted representing expense. approximately $X.XX billion increase reaffirmed is XX% XXXX. over XX% between earnings growth XXXX. growth LIFO to earnings expected excluding the between our for be between million $XXX over of share for X% noted are XX% per expected X% to Sales to guidance increase million year. Adjusted to Represent to be As $X.XX release representing $XXX XX%.

the generation a the free capital flow purchases estimating We expenditures. are on of year flow, for inventory $XX the little of conservative ahead currently million but cash free I'm and on and still our depending to our plan be of million between cash level $XX

experienced expected XXXX our with the we're summary, non-cigarette and year. be rate million is start the to of are we've a and tax to cigarette year the to solid grow expenses over levels prior outstanding price million what assumes revenue effective assumes diversify be for $X year an for tax $XX of between gains and $XX million base. to the $X In off continuing Incremental years. guidance million to interest of the XX% million our magnitude be subject impact diluted reflecting rate $XX.X of U.S. the Our two consistent expected during increases. the the and progress shares we with inventory reform. the forecasted in In which to increases LIFO interest assuming are

key our profitability a reduction on additional will of for cost execution operating initiatives. the on key and continued I executing call over questions. our XXXX. improve portion While of We in initiatives to our operator the growth will strategies focus in core turn cost now and leverage the our believe reduction result

Operator

Thank you.

now will from We Instructions] question-and-answer Jefferies. Chris And [Operator begin the question from session. first comes Mandeville our

Christopher Mandeville

I be mentioned isolate absorbed I acquisition. predominantly good was morning. know but it core EBITDA better understand had start down quarter, versus to you versus OpEx the it break just improvements first you Iowa, if the would warehousing that Hi, you to could what in on Yes. was but showed off on some prior Chris in able the nice could SG&A? growth margins, trends,

Christopher Miller

Chris. Hi Yes.

of mentioned Iowa quarter the by costs. delivery that disclosed warehouse we big followed haven't increase and piece as number, was delivery the in We the then but a for expenses

Christopher Mandeville

April, and improvement you continued haven't missed how then trend have date? I what I the some into mentioned quarter and it, volumes the that had are comps you there non-cigarette realize mentioned to quarter you cigarette throughout And or absorbing have of does sequential may month Okay. but seen comps that or

Christopher Miller

has than Same-store X% went products in quarter X% think Aid about same-store last first sales, which was good our which quarter, Rite the averages. I at high Chris definitely non-cigarettes. a stores we up solid and same were so what lot the April shown improvement, the impacted in so dairy X% trend quarter January because in of our it And going is settled first in to over saw for had it the sales added same-store we on year

Christopher Mandeville

back about demand hop the the between Thinking do overall the and And demand pursuing one queue. really guys stand optimization, the from last right optimization we or then strike you how driving where Okay. a balance and the I’ll me for and in increased seasons of profit? do summer that terms Thanks. route in route

Thomas Perkins

Yes.

at the we the and put summer. strain the on drivers as one most cubes on look probably for as Chris So that's during far we focus load metric the we

route that sure size, on the of kind they driver much to of depending a driver. into with We truck strain really back we we And those optimizing a really our So weren’t second many so cubes put on driver. our opportunity. can't cubes on quarter half of that's make last like have focus not a want – is the single going we were of on how of lot kind to too a many we putting them maximum had getting year, that for through putting the And number. routes, but to capital felt

Operator

from comes And Bienvenue question from Ben Stephens. our next

Daniel Imbro

Daniel Imbro our on for Thanks This taking morning. actually Ben. is good for Hey, questions.

Thomas Perkins

Hi Daniel.

Daniel Imbro

you the a I you manufacturers of you’ve those to reports pretty of in start how in to navigate guys kind improvement, but rest tepid as seen that a the year? volume remarks improve the start the your cigarette year, some you noted and volume absence the can through of what's trends, through expect kind so So of guys manufacturers this XXXX on number results assumption think environment? wanted you that look to of to declines I underlying

Thomas Perkins

Yes.

year-to-date saw backed X%. X%, the decline So at but like we around just you X.X% impact California to declines more we out kind were, it was if of restate and same-store where we were

at look our X%. like where same-store in we more April, you As out were were it declines

things trend Marlboro other same-store one-time that if and Marlboro positive So dramatically And in a has we also that pretty was I improved with seen sales. are and look X% on to as pretty going at well. down we've from promotions, see think you it

was think is it's we're So balance the California where That that probably we I up, be. we to from that. question we your for being first end overstated to since don't where to are know said, second going look of of lapping doing especially the quarter but part combat the the year tax what your

We decline. it's to manage be focused continue strategy mentioned as fresh. have – our Obviously, things the that leveraging and a and it's and pick really that on we going to independent I also focused to partners accelerates, and up roots we we've street have but We cigarette to know that the be gotten really on around food last have and good carton prepared and which through have of been to year kind if and costs key then more service are pushing to our retailers back what find profitable. multi-pronged, trying chain

Daniel Imbro

to Great, yes, but particular independent or continue on geographic that point, are to capacity within your that, network areas can excluding specific or growth color. on? of that you are strength any of regions Actually for any then maybe there of maybe focus kind focus California, And areas that easiest seeing there you related last have would are excess grow? the that weakness your kind on you thanks

Thomas Perkins

areas the capacity. part definitely of have can where first. – of think network volume our of year second customers. touch the kind change We lost with you We we out definitely about And last I’ll with

half So the that's in eastern most the of U.S. of

of all pretty So a the definitely buildings region, we're at on capacity independent have – that room customer good rate. focused we growing grow our to really but in in

the buildings up of trying now aren't the part then first So business. have say, what any we was would street And question pick don't scouring your that to I again?

Daniel Imbro

areas weakness? the of excluding of country that we're strength kind there other seeing were any particular part of If or California

Thomas Perkins

in in of we probably divisions weakness a affected affected back on around weather, if eastern I their horrific pretty to be were we those and some regions quarter happened half look at saw U.S. that little carton quarter so. the first the more that think more were by steamed what in carton the affected first the In the

material. had that an impact on think it. I outside nothing that Look definitely that of

Daniel Imbro

last make or think me maybe on Okay, I those that’s you but want to Then just your like businesses, this improvements for least to the those line what in sure, kind it of clarify you in one for great. months sounds summer heard I the progressing about? correctly Coast, would or are with schedule, at West the key test made

Thomas Perkins

Absolutely, businesses, on we have telltale of we those job good our or business. as know, summer much for them done we've feel in really like But than summer done better a the the a you job is the historically. positioning

And in those have be us. a so summer and to good that got divisions big we've will really a for contributor

Daniel Imbro

congratulations great. role. new on Tom. Okay, Scott, Thanks the retirement so and Congrats on much

Thomas Perkins

you. Thank

Scott McPherson

Thanks Dan.

Operator

from Wolf Andrew Capital. from comes question next Loop our And

Andrew Wolf

Thanks.

that result first quarter was to the ask annual budgeting? what EBITDA give you about the you since pretty don't were to in Just quarterly guidance, close

Christopher Miller

Yes, I would we with be. was that we line where would in thought definitely say

Thomas Perkins

most, we wanted cartons think to line – in I are in with I it I think the the surprises what the first quarter. was think be overall where but

Andrew Wolf

of X%, you what be went Is to to it so about be could something back forward? think there surprised is I to normal. got which get down that that strange Okay, kind seems cartons, to going you enough that the is guess

Thomas Perkins

of bit of noise we at in buy California. there end because is cartons little the QX of had there a in I think a significant

declines lapping So year-over-year QX, definitely cost didn't it April. for in but saw I think and have now we're big very we strong

the that be range a that three little carton what one. five well. just to on of but bit tell think was noise it's I to expected, the not going maybe as that we So in purchases say will I'd how California range probably in probably it time But four

Andrew Wolf

your guidance for while is somewhere, to have And just four plus declines same-stores? I carton same to or five got expecting said, you what assume

Christopher Miller

X.X% out last said our that range we going we guidance thought year put to we Yes, that X%. historical that be were when normal we in to

Andrew Wolf

Okay.

reset kept in or guidance business you’re things quarter. your or where know that you basically little the came internal in last. of on worse they projections were the when in last is cigarettes you a them as much doing things better or there than going sort first So Sacramento you and change either earlier your levers projections Are pretty

Thomas Perkins

I I are that you it's - Andy. would think still a there combination say

Andrew Wolf

well. I I'm just yes, am,

Thomas Perkins

Okay. I'm sorry.

we And think job I getting the in successful warehouse they a carton have were we fresh food have we we you we working and and service a two expense accelerated at our on decline definitely expected. model But than little first pricing a diligently pace really what higher growing in which did the with. leverage but quarter good overall warehouse well mentioned divisions did there. really of been

a saw that the a unforeseen improving. category. that of And that thing of of kind come e-cigs alternative benefit We was growth accelerated in decline. to they've So I been of some significant was the think helped it's and which kind us other combination cigarette a vapor nicotine

Andrew Wolf

I just And – Okay. on of on side fuel the things. to wanted ask

a I mean little. sales gasoline same-store up heading pretty were front-end. good in with consumer the the prices your For

anecdotally or heard is industry changes or have – So you anything in traffic the about are any not?

Thomas Perkins

a lot lot There's a conversation been of counts store in not. declines traffic are and about and

was published be eastern XXXX this at If look flat XXXX half what QX you lower around you QX the income think in store to know and income. to earners you said affected year that I our know it appears trips. disposable And pretty puts of next pretty about of customer’s just say was they've conversation estimate then disposable I and U.S. also obviously comps our when so the consistent. to we same-store fuel know the in would for would was fairly that's concern sales that But industry But I lot outside store prices pressure others up the traffic income one weather with The it be some you of going do of were got on that kind of like you good. some of less that that those affected.

by that. incurs So

Andrew Wolf

sorry natural and If past Just your this through if lastly, it diesel the gas your so increase that it. But impact costs? you are you might can but delivery in did did prices. part it of mention Did maybe just about your eventually?

Thomas Perkins

Yes, our a a work. our either definitely cost, was We once or change part of those quarter. month once surcharges fuel way the delivery

has there to concern definitely of would but us little see the of bit that is lag raise. definitely and for help we continue year side a So impact know. - you Actually recovery, a a that usually in a C&G bit that on an the

Andrew Wolf

you. Thank Okay.

Operator

from Kelley Our BMO from Bania next Capital. comes question

Kelley Bania

taking Was Hi, growth wondering just good questions. could morning. sales Thanks me if my the understand of for quarter. this you help

much how wins the from and the and the acquisitions takes of what in kind was contribution puts X.X% the and of losses the customer there? that organic So verses different

Christopher Miller

Hi, Kelly. It's Chris.

the far the And big mentioned. course piece growth. of there as a then was of Walmart was acquisition we So

So and then our the our contributed right sales also of same-store for quarter. growth course in non-cigarettes,

So offsetting expired those the the are last that then drivers. was And key Kroger which year.

are those big pieces it. So the of

Thomas Perkins

I Kelley, here. think that Tom – it’s Yes,

from increase. piece I that at of had But the what you we other sort know Kroger WalMart which the really of look each impact sales other an expected. think definitely think is I that really coming and the I same-store that growth services offset

Christopher Miller

you just to mentioned, That’s if they adjust looking at organic X%. that, so non-cigarette sales, Maybe to large the the I growth. Yes. about add our for so grew items

Kelley Bania

sales? Sorry, that was the non-cigarette

Christopher Miller

non-cigarette, yes. the That’s

Kelley Bania

I questions. then more couple guess And just a Okay.

drivers some how pressure X% cigarettes about characterize the really comps are non-cigarette still more on soft bit of In of – consumer? pretty little seem income you the disposable Can to talk and guess mentioned across could just mean the what's characterization the it of solid, from pressure I environment, you but challenging, disposable like income context softness the the on terms what you that more C-Store I just really driving you're would low provide soft you can that you be the on go obviously income here? industry of this think a that environment where the

Thomas Perkins

few that a Yes. I costs. softness. talked mean fuel I I’d We say driving are there's about things think

bit. trades is little there from other and talked I that's the pressure about think channels some been a in

be that think are although, on their was slightly, activities. QSRs their from and impact themselves feeling a small our there's have there some e-commerce cartons stores there. share And the dollar they I I you any probably but We there's have promotional probably think volume do of pressure locations, there's some kind pressure be because little pretty of ramped lot from think then retail up have up to are impact naïve. a impact doesn't would on that think overall, so channel

One is to is back of last of the thinking some Hispanic I going – income there's as three that tends you is that that of or three segment But encouraged know their percentage and outlines they headwinds that just I the often of to lifted. plus the they times – consumers there's one think consumer income stores disposable are to be a minimum and low kind consumer, couple there. visits some convenience four then So a higher income increases the week. the they are are think to be years pointed might that And one over and think wage pressure things. going going low it going be But I down. that's a as by up

the is I share answer costs overall information, the with definitely – fresh, drive I fuel that headwinds have nicotine us. and in growing. really really traffic category food which and even category non-combustible So does but question? is of some lot service that your think say A and would for there's and we opportunity and We Kelley, overall, gains and cartons think market

Kelley Bania

very helpful. Yes. That's

also look chain and abilities you trends any to your independent on across your note, you customers weather Just environment? the kind of customers their different this soft seeing are same versus as

Thomas Perkins

recognized say offers. the big would of I national is fresh chains tend there's I think larger food couple customers to the independents have better I our one lag the say that's One really wouldn't is that and And thing any have job and differences, a a behind with to I do they attracting service things. job. slightly

customers to they independents key, understand really is food as item convenience those is fresh job a item. services make to store a for service that educate the enter driving that's one number sure that or a Our food

XX% one opportunity And They on sit store. thing think the say industry, our over come is and the customers the that into the never whole that's the have other of we would those to is The leave do lot. I I better pop and biggest real get technology the our inside, the for independents, channel they're big other and the and than chains the people starting thing across and leverage that opportunity to opportunity it's digital avenues that's a channel.

Kelley Bania

reference I addressing that to I pricing on Okay. then opportunities to wanted model. just trends, just the And made further your meant. cigarette That's guess on what clarify also And helpful. a you

additional level, the your the opportunity the take increases mentioned You cigarette manufacturer increases, is price business? typical price for increase an of but to you kind two there an on price on

Thomas Perkins

cigarette that. you would about know Board have at Kelley, people of on don't as look to participating the there. But the definitely we on business, on if the up competitors call, more it's I and I talk we

opportunity detail, some not the but customers. would just that has get whole price our probably think into it's So on industry say we'll in an that I I how we

basis we it’s regular look that I it's and And an so at our think definitely opportunity? something

Kelley Bania

Okay, thank you.

Operator

our Domyancic from William comes from question next Blair. And Ryan

Ryan Domyancic

and morning, my for good questions. Hi, taking thanks

three So X%, that to think to year, which is the the X% non-cigarette some work? comps this tougher guidance you throughout that next that environment to like gain but in market can same-store quarters on three figure XXXX first continuing you in are good make the I start, make good do April’s tougher get to a does guidance, for of off that anticipate a fiscal comp think sales next of there hear, kind increasingly the or quarters share

Christopher Miller

we X% like acquisitions that's that we look sales independent normally there. X% X% like a group. same-store But it's forward when customer normally growth inflation is X% are as large regular for cartons look excluding if organic we ads growth, Ryan, we usually and just or normally include large Hey, look growth, at sales

So think the better our we guidance than is that's than X% I expected. what

organization sure right that sales the if focus Scott stores fresh have is to organization on see our how service can continues, then but food nicotine make impact. right as alternative the whole that's we'll in said sales so we our and offerings products, And the that that's and customers they the have

Ryan Domyancic

cigarette margin. of helpful was, come sense Can you of tobacco sales a traditional what products, vapor mentioned higher vapor the between in customer those a cigarette sales just on seen of margin gross like that's yet your of at vapor a looks product? call one products, have but second and the And you a frequency a dollar in do and from you've between the difference typical differences Okay, sense then what give a customers then customer? typical us as they a the lower higher

Thomas Perkins

a than getting might margin when Yes, Ryan to confused lower definitely clarify margin. cigarettes. vapor categories, a we a have products but so the just products margin non-cigarette in be have say in our think little I vapor the a lower products you other higher They

clarify to that point. just So that

Christopher Miller

I Scott I think talked and I don't the think to consumption they everyone is that think – – yet. know we've

Scott McPherson

Right.

Christopher Miller

frequency what don't that the – own arms around, they’re how of that’s know cigarettes still get what and of their a They vapor some is buy to versus one pen pack trying use.

Scott McPherson

is of vapor device. get all in their and that's devices so channel Ryan somebody and others comes that smokers’ what they're we definitely that and device kind consumed trying something to [indiscernible] around that kind Yes one of new is ratio every e-cigs or and like. vapor ratios different Yes, and as vapor of the use arms using are at look drop different are so rates devices starts consumption in

looking it’s we're an outstanding So definitely at. that question

Ryan Domyancic

the All for help. right, you thank

Operator

our question Lawrence John comes Coker Palmer. next from And from

John Lawrence

Good Tom morning of for all first your congratulations. thanks Yes, help guys. and

Thomas Perkins

a support years? you John. pleasure It’s all your thank been the and over Well, appreciate

John Lawrence

segment low low Talking the Yes, of would that to Thanks. or assume is stores? Hispanic Hispanic might those et areas. we that business I looking declines in that and specific customer segment stores of XX, with little decline just little the just instead be low fair? mentioned some that You're would a it cotton declines that stores the the talking the cigarettes middle wind a on can about you those specific at segments like just in about cetera, bit, bit double-digits and income carton to

Thomas Perkins

see to March. maybe heavy saw specific Hispanic It know half decline Ye, would pretty accelerated have saw accelerated. really anything Like market, never channel in company country direct states I I little that kind the in east. in bounce but that But heavier you population. didn't a which was eastern after of the obviously influence really the a and our correlation carton accelerated John, decline. you I declines that as back said that think I good on haven't across anything I were - a was have we where call consistent didn't when see we I see about seen with between the a know

John Lawrence

Okay.

doing what So program you – him. times that good in I Does to guess that an [indiscernible] bad. like come programs that these dynamic you him guess and reach your a this for give have food and customers doing marketing hurt off. for is does that as look that’s I and as desire of trying that more far getting get does cycle to is that look business how where sense fresh, his not is she's There

Christopher Miller

one fresh so environment, be healthy, to income it I have focused all kind the which Wi-FI of a or know points is focus in low things our us visits they're to is offer of better is the bit that I the consumer are pretty pointed channel free thing they'd the the income pointed on seeing they in consumer of they interesting. would lower I significant less industry one for a and frequent to information. we seen starting to thing be The larger good customer the they've little driver Yes, was definitely state and making the food this you to in that you'd shopper basket of which a service shift fairly to on really a know are we're whether think earned, a that what millennial customer be the think the definitely say on. a few fact is tends think focused we good the gain shift that you that is but thing But that fraction they're share millennial also and

John Lawrence

stem And To for bringing the sort tide business. me any help bit. products new little the of last that’s to thinking your of out question except about a non-cigarette sort help

Christopher Miller

for organization out category kind it's say evolving ever I the and retool of the was nicotine of long the you one right there of channel the time sure sales in it it's And the kind just a recurring other know make is. thing an our that stores to that of options cigarettes. because around alternative we've really would thing’s our products one had the thing emergence nicotine all company to

Thomas Perkins

are other consumer for that's I the for of our offer. of and sandwich fresher thing a service one continue means that – expectations you and food this job sourcing continue to know us. a to grow good increase. for fresher and we're fresh food And to around looking going fresh the The to thing divisions that products of your every whole our a do market great so and

John Lawrence

and questions and Great. good luck. Thank you. Answer

Thomas Perkins

Thanks John.

Christopher Miller

you. Thank

Operator

McGinnis & Chris Instructions] question and [Operator Company. from our next comes Sidoti from

Christopher McGinnis

taking well Scott in Thanks role. new luck just retirement my And best good Tom and in say morning. questions. Good for to tanks as should we want

Thomas Perkins

Thanks Chris. Appreciate that.

Christopher Miller

Thanks Chris.

Christopher McGinnis

the you touched but I how. think of know maybe talk you already the Independents about on I do just health with start just maybe you Can

over support know part new wondering You help the that's can you maybe know target maybe changed the and growth higher just know to offerings. And you the that in know with their you invest with how maybe how reluctance FMI their maybe better them own you some I stores. know talk past you how in of I'm market. can the can you you years you Can about know

Thomas Perkins

and independent make really capital consumers Chris difficult that really make for to to a it investments. is You us our good is get oftentimes that point

we all together vendor program manufacturer getting whether equipment retailer need a put a investment a a through was buy through So funded. and where them into - and commit realizing products. And something to FMI bigger stock with a of really on to get And to of no programs make those be what something purchasing directly the on have to had our investments. then programs program essentially prompt to almost hard our they derivative really just working come it structured that's still in free be FMI that our kind to food. the the from subsidy understand do goods or make are and that we're our to an Either that say fresh that in sure they're safe time attract I'd all people We clean partnerships. can appearance through we've our self coffee that gravity way buy to of getting have to and and now have would picture, it, and stores capital essentially they're they are worked that or from

Christopher McGinnis

just labor labor inflation you as see year choose a talk for And maybe could the can over that. in what – little wage and bit you the that Thanks just and about hurt guess you or that much force? how I how

Thomas Perkins

Yes.

couple are kind for on do have it to increases. increases, on be those pretty focus doesn't does. stay transportation there our with obviously But that want. an get the of a close above just minimum markets I'm it year that consistent built all employees wage wage we a guidance. a have absorb in been definitely fair basis competitive into that saying surveys and productivity impact, we we not and was we warehouse our the and plan kind wage have and bit and always we wage where to and We've us we this of which and escalated states minimum So try

Christopher Miller

they're things add that And their was labor. retailer we they're seeing most increase a about feeling so the they wage, that the the environment for of store big again, because that probably weren’t Chris about minimum the in talked of wage pressure on detail one

their wage and not help stores sort plays into cetera labor of our duel as a only costs lay they're efficient that also FMI, there, vendor and of merchandising from can that seeing. our of how them hand that but and out take help can out also stores some be and sales pressures their in more their that sort et our them services play So we of so fresh consolidation, force

Christopher McGinnis

explained and apologize may Sure. remainder It the efficiencies if you Can just the the quarter of better And this I sounds and the you for in touched how talk been I asked you or already and have this is going route about it. you on year? guess good. prepare

Thomas Perkins

at the say I'd costs when which pleased overly there say transportation wasn't about that contributed but things quarter fuel. look I is Yes. I'd We I that talked few with, one. for a

but read The anything couple you years, get as markets is about the pressure on we're starting bit last market certain other shortage. little starting – to done driver We’ve drivers. feel of is over to one pretty of in the a well you

we about we that the a in on So on the was restructure if done so to we've routing in then job scale. We've one on in kind good much more and where June have a of of rerouting we involved staffing, had which a route and real year our up of of year some will do April, thinking just focused in a efficiency, efficiency. of our this global little cubes May, is that capitalize are company come on truck try to And so this labor kind a routes things QX and the guys heavy ways. opportunity the increase across of probably time that's ramping corporate we XX% kind

on over well. make the truck, cubes maximizing it are if months, break this five next efficiently – routed really the really the do it's to and is or So it we we’ll

Christopher McGinnis

And follow-up to on just I guess that.

need XXX% can that to maybe morning is reiteration Is be guidance? how the is successful next in accretion you and bit into of the coming the you us guidance it how Just on this terms do that operated little of in guidance give just much of how months this efficiently, you a morning? much

Thomas Perkins

you I us first about quarter really for is would positioning said, for this, the tell think summer. I like we

that we headwinds a don't from any divisions sideways We level focus our good and would a so we really of guidance. I quarter see I crazy both pretty already carton that months and really year historical feel our standpoint. it's warehouse our did six job of with last the doesn't happens. the we've decline the to not good in we But think talked transportation in efficiently, of a normal assuming to for summer had drives I changes operate, about. staffing the let get first comfortable. to and happen, summer think is positioning business in pretty back couple about and reasonably us it If expect a pretty call that feel year I kind that we and get this we

Christopher McGinnis

I Okay, thank very much. QX. appreciate and you good in luck

Thomas Perkins

Thanks.

Operator

Brownlow next Our question James. comes Raymond from Ben from

Benjamin Brownlow

Hey, thanks taking for the question.

want On to make should year-over-year the the going acquisition $X basis I on growth, and SG&A million how forward? I SG&A two the think run heard was think correctly. rate – sure just up quarterly just a excluding we about this I

Thomas Perkins

Yes.

so So Ben, a million $X.X up growth. the yes, you're excluding is acquisition, right it was which X%

run probably that's a about decent going level. perhaps X% I forward X%, think acquisition of rate the excluding that

Benjamin Brownlow

in to lift basis heard sales make basis. late in Okay, point first that great. sure quarter XXX same-store on And a buy just was I the that correct? to that April Is around carton

Milton Draper

Can you repeat that Ben?

Benjamin Brownlow

Can you was? and late the over the same-store of sort impact go cartons quarter what buy in back April

Thomas Perkins

then excise to an California, in and Ben, in impact it's impact the the that the patterns nothing cause when taxes, buying what was everyone with April price the steeper by only had But was caused really was really California increase, I basically really they distorted their don’t had manufacturers month-over-month huge the California, that some think but the in there raised made. had drove. X% deepest was increase so because decline you bought last there because which year from that – buy was right, had that really trough of any this in March, do in it a in same-store decline which price

Benjamin Brownlow

Okay, understand.

purchasing a timing. was that So

Okay, great. that. clarify help Thank you. That

Operator

question last Chris And our from comes Mandeville Jefferies. from

Christopher Mandeville

new we Hey, there of that minimum thanks Scott, assumptions. you're your follow-ups. the any contemplating need increases for be go state mindful when tax or to forward are age excise

Scott McPherson

abnormal and that, on basically looking is only there that like apply There's of shows material was would think always outside one just but say I But it's has at them not that that carton. was overly a the Oklahoma, XX is $XX I or one noise. just number normal the which which of passed XX, of

Thomas Perkins

X. July in effective That’s

Scott McPherson

Yes, in that effective July. one is

Christopher Mandeville

against matter for went going some contracts? Okay, any or worse that's it after you're were there national of maybe business how helpful. new a they how deviation regional recent notice competition whether chain or otherwise? be or major up examples on or you And that for then Are you new where better pricing

Scott McPherson

the Yes, national of hits as alluded kind is in there big now. any we've last couple out to we there haven't none right calls,

for see historically. competing a On or rational, one-store, I chain. the we as we're would store store market characterize would XX of street what that and XX whether the kind

Christopher Mandeville

Okay. And guys had running last thinking then just the for me, your one you ahead flow here. are mentioned free cash Chris longer-term. of schedule on that guidance

labor or your spend do relative pretty about I willingness a how significant sales. know you your maybe CapEx think percentage need your have competition. some we So of and increase a force as to of

on to more to use allow how over improve become or some maybe turn understand their and independent to just yourself I’m in trying customer, would the automation? efficient competitive of savings position that which IT because greater time I'm can the pass through your theoretically to guess you I So position? of you would

Thomas Perkins

the kind We've at looking SAP that's that with two will divisions we there at and transportation at and organization mean warehouse across other a transportation I then costs as a which Chris think us of We've efficient I And we're know to leverage I one finance a that out there. have we got as consolidating is and looking handheld network. have well some sales our cost fair in think out. question fixed and things, some ways make taken group, we looking group Chris just right his which now new think I driver completely more something got are situation. opportunities some structure

kind definitely as down of So definitely at we look that the cost we looking those the our are or streamline things turn structure. are road and

Christopher Mandeville

of Thanks Thanks seeing Chris. month. forward guys to End right. again. Look you All Q&A next

Operator

no And have we further questions this time. at

Milton Draper

in We you your our Core-Mark. for call your appreciate support. conference your and continued for in Thank participation interest

me Thank have additional free feel Thanks give to everybody. you at please call a questions, you. XXX-XXX-XXXX. If

Operator

and gentlemen. you, you Thank concludes participating. This conference. today's ladies for Thank

disconnect. now may You

Core-Mark Hldg (CORE) 8 May 182018 Q1 Earnings call transcript