CORE - Earnings call transcript Q1 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to the Core-Mark First Quarter 2021 Investor Call. My name is Karen, and I will be your operator for today’s call. [Operator Instructions] I will now turn the call over to David Lawrence. David, you may begin.

David Lawrence

Thank you, and good morning, everyone. led and McPherson, Financial Chris be Chief President Officer. will Officer; Executive Miller, call by our Scott and Today’s our Chief

results out in provisions of Before I Private Securities take over call Act the release of from the to as Reform our point noted forward-looking statements, include advantage indicated filed harbor we risk uncertainties turning to by today and comments such earnings Core-Mark this materially morning. safe to the Litigation Please may may and implied or actual are those intends remember subject the the will differ that statements. Scott, which

Some of duty such forward-looking report company’s annual on the these Form statements. XX-K. to in update does risks any described detail The filings, undertake our in SEC including company are not

certain we financial refer Additionally, this call. measures to non-GAAP will during

You to measures our investors other of on non-GAAP XX-K. useful these now can the measure I’ll quarterly Form of information, measures over most why including a find and these call release and GAAP discussion our earnings the Scott. a consider related comparable financial to report reconciliation we in turn directly to

Scott McPherson

for with quarter continued thanks Thanks, on quarter first joining strong and everyone dedication call. work hard our family. line the results We Core-Mark us to our in expectations in delivered the today for David, and reflecting the in

growth to comparable sales behavior quarter. impact a sales our the deliver margins. both non-cigarettes to were on continue While the of pleased consumer for COVID-XX effects mix and cigarettes basis We on in and

since same store for in growth America. the peaks steady with Our the COVID-XX positive of North non-cigarettes reflects from the growth struck a revenue first quarter recovery sales pandemic

our portion our to fresh our by affecting U.S., impacted winter This candy momentum weather grew in of reflecting food categories. showed XXX sales performance a of grow our growth was trends supported total efforts to year per metrics quarter. in by benefits percent by of and operational the strong throughput and remaining striving an share. leverage, basis, customer From over early benefit February quarter and a on perspective, we continue stores, growth in a were and While year, our positive improved force expense expenses delivery on the gross On sequential sales in from Core-Mark extreme our warehouse market efficiencies significant including cubes count our restructure call in route in last discussed as profit sales disciplines. we

mix perspective, with supply about Turning center national momentum to optimistic our growth we strategic recovery. rollout chilled the and From by continue a management exiting our category remain leveraging Coast. the West a on the Foods from and continued our I’m Fresh with our pleased and new execute Ready first of margin quarter redistribution initiatives the partnership on to chain perspective,

food consistent We selection now fresh of across product providing this are on offer and centers the distribution to to customers end XX by XX and lower to year. the the remain premium course all

are now and the offer which distributed our curated of We being our launched first label phase have candy product the divisions. coupled private throughout U.S. with Core-Mark snack lines, also

partnership branded PDI other with to customer a currently number loyalty gain platform technology have XXX a retail of PDI the signed On store to engaged. our recently We the side, and traction. continues chains

access offer loyalty off our operators loyalty two with customers solution to also comprehensive a launching weeks. be and independent we’ll provides We next to independent as exclusive are in PDI the application that mobile our bring technology to leveraging top

scan tool utilizing the customers XXX and of over cloud-based PDI have we data solution. point sale Additionally, aggregation

recently services, accounts services as will receivable multiple which in This groups, center, division headquarters Finally, the accounting functional center new finance from team, visibility service, satisfaction. a our house not opened centralized of recently metrics providing to building real-time key located cost only is customer metrics cost and same our our driving better provides focused of Texas. experience operating in and functional we enhancing our efficiency, standpoint, corporate the increased service including center and business but our leverage case organization. In customer Westlake, and to is customer the visibility The these on payable, enterprise groups centralization improved performance. and

As the chain initiatives, we strategic execute challenges. are steps on taking we mitigate our to supply continued

a which working a are and environment. safety strategic investments fill inbound challenging fill running our best vendors customers historical creative rates closely very the norms. to our working we XX% we sourcing, are and to in inventory rates provide improve industry’s stock Through Specifically, combination below nearly are hard with of

difficult Additionally, summer to as peak positions. relates actively and we staffing are anticipated we begin labor our filling the seasonal market given driver it and to season, warehouse head as addressing challenges into

We robust and continue challenges hiring and digital faced Core-Mark have divisions for recruit strategy country deployed of talent new the a the to recruiting greatest the team. areas that aggressively to

the in consecutive margin and performance financial sales cigarettes gross profit of one for saw quarter growth impact remaining recovery cigarettes for our our our the both in non and adjusted improvement. selling representing exchange. We day continued less we delivered to quarter, of foreign Turning third

expenses productivity managing improvements, operating than reflecting were lower leverage the and same from Our year and around gains warehouse last delivery, continued and quarter benefiting costs. cost, discipline

offset resulting of increase, reserve. partially tax from million by a unrelated included EBITDA gain adjusted excise QX state Our excise an tax $XX.X a

above and prior in leading benefited into loading impacts pandemic. XXXX, the benefit than we that pantry height of EBITDA adjusted these quarter the year, our cigarette of COVID holding March from the QX greater delivered of the Excluding gains

return $X.XX three-year share. Turning $XXX announced shareholder to per today quarterly a plan, we of dividend our strategy capital allocation our and million

have to and XX of next part a growth evaluate over potential algorithm also the it meaningful M&A our continue XX confidence will to months. We actively be

buyback second we our to quarter, the share As expect plan. enter we leverage Board approved also

the Chris steady to financial our the results. remain to these we over for summary, QX execution will initiatives, recovery the the optimize focused continued levers as shareholders. positive of strategic over We of now for In our to effects our go COVID-XX, second on reflect into the hand our value I continue three details from momentum results call heading will and quarter quarter. against

Chris Miller

increased the everyone. per million morning, $X.X I’ll over Good and commentary pantry-loading results year covering earnings additional update year. some by increased on performance, million quarter the $X.XX despite last per our first for on $X.X with last related to COVID-XX We year. share the provide an that for guidance first last benefited wrap to $X.X from delivered the quarter to Net first Scott. off solid up in Diluted liquidity year Thanks, XXXX. income quarter year. to share compared start quarter,

increased XX% per $X.XX $X.XX versus approximately to Excluding last share year. LIFO EPS expense, the alluded

inflation in Total in total quarter for the by approximately with sales. in total in operating both decreased to and March. driving cigarettes We’re our efficiency our decline growth X.X% foreign reflecting cost on February Total a carton We by sales decline Adjusted the first for in cigarette a small and pleased in saw increased partially basis, quarter billion. sales comparable $X.X monthly the January, sales for declines first the offset increased X.X% selling offset results impact same-store in by the and cartons exchange continued management. led operational the quarter. day sales X% of on a price less by basis quarter cigarette strength for one effective

decline of X.X%. same-store sales the cigarette reflected March in in results Our carton

X.XX% pandemic, in with COVID trends X.X% mixed margin profit X.XX%, Scott loading. a in benefited start mix both quarter of same-store the basis, from mentioned, the across increase the as However, toward by sales margin Despite improved X.X% March by and remaining sales basis Non-cigarette other the COVID-XX, pantry reflecting continued category. reflecting XX all shifts since continued growth of comparable Total food related and quarter points increased significant to it’s first non-cigarettes. XXXX, challenges in growth candy. every sales commodities, delivered of from the lower mix which on we the against declined than margin lower cigarettes for to gross the

profit decline decline However, declined quarter of comparison compared and XX declining year, points quarter peak the in fourth height in QX consistent last fourth XX from margins basis a points points a in the in of of also last improvement, year second quarter pandemic. basis the and XX showed points, quarter basis peak by our Non-cigarette the remaining improvement XX basis gross year. points the during XXXX the quarter in basis of XX reflects to the last XX the continued margins points basis to sequential in second

Our decline margins. mix majority within of the our non-cigarette categories in the drove non-cigarette

$X.X quarter cigarette $XX.X cigarette first were gains Our with last compared period manufacturers, in was million increase the cigarette quarter. increases timing the in year. inventory of the to million due price primarily The holding same the gains for by in first holding

an gain value COVID-XX. our a with in and million last increase partially expense, cigarette the associated expenses, Several expenses operating a associated delivery Colorado. X.X% by stamp the lower a inventory the benefit as million SG&A year $XXX.X incredible on expenses of and quarter impact expenses reduction million in SG&A points in the a expenses. our delivered included surrounding in warehouse gains, holding company by increased The expense, uncertainty to excise XX.X% bonus warehouse X.X% op-ex offset opportunity, a tax In The of million reduction to first in efficiency to XX decrease from $X.X in in this percentage this $X.X associated operating the This expenses and claim in X.X%, realized in addition total of continued leverage year. to of an Shifting million, employee with gross gains. XXXX also operating job XX.X%, QX $X.X cigarette incremental we in the benefit bringing for of operating $X.X Ontario. an We or of quarter did was remaining profit capitalizing on first delivery, improvement basis benefit tax expense declined price with quarter. shareholders. includes to

quarter bonus year, related I improved XX in Excluding the in points earlier. SG&A of would the benefit first employee of $XXX,XXX of claim year the operating for approximately first leverage the to Interest includes have expense quarter approximately the basis expense OTP mentioned impact this XXXX. last tax

our been interest have drawing ABL. cash above $XX.X of quarter in would $XX.X flow million, on cash Starting sheet, $X.X expense generated ended million we million fourth million with to compared Excluding year to free slightly quarter flow million. expense and and XXXX last this the interest $X.X $XXX our item, balance

quarter, our mentioned, into heavily as second inventory by rates, chain non-food supply customers the food As an levels continues the effort to and higher we Scott in as be maintaining the we manufacturer be will higher pandemic. to move fill provide affected

we release Turning the we XXXX our filed our in for morning. year, this guidance reaffirmed outlook the to press

therefore as and manufacturers, in inventory timing tax We gain year for While quarter, This increases the was gains last of increase from have year, period And same offset against not higher again holding I $X.X gain the for were not of cigarette mentioned. tax first benefit to XXXX to previously our million. cigarette cigarette we price OTP on the this the anticipate the reserve inventory price holding the outlets increases compared from stamp cigarette full the the primarily gains as year due guidance. by partially reflected adjusted our not was in $XX million while gains claim. do

are with not how this we our XXXX, Given we continue turn guidance optimistic pleased pace now Thank up, performance revising the are to recovery seeing at the we we our in the this our operator. in and To back early with the market. that about first to strategic point. you, initiatives, quarter, the are combined wrap remain of against we call the I everyone. current we’re will in execute

up open for questions. the So line

Operator

we Stephens. Ben And from have our Bienvenu from question Instructions] do [Operator first

Ben Bienvenu

that XXXX? that turned look comps So hear have March what window. I’m about like of to being You non-cig does I’m kind positive. relative stock-up to glad talked curious, a

back actually against terms an to curious in maybe trend that normal close base, line? strong I’m returning kind are but of to So it’s how we just abnormally of

Scott McPherson

in three, a you kind and Ben. March two sorry. decline We that’s question, a no, a – XX, run-up Yes, XXXX some of good and then in and week XXXX, I’m remember, March of of time of in or weeks, big dissecting big four we if spent kind had

pretty was month then XXXX had at comp a look you increases we good And really XXXX. if XXXX back March, so obviously And overall. over

this category fairly March month. in downs, ups it it at but at up and XXXX were seemed a was up. some we look looked even category. Food though basically every had I versus we other XXXX it flat, every stable in and So And way, was

momentum saw Obviously, really coming momentum winter of of out end we February positive good storm some there; but there’s March. wasn’t of other quarter So strong in the really and as impacts March. some because

Ben Bienvenu

in I if was and rates process? you’re to that changed way pricing? back how the do patterns get back work COVID to revisit, disruptive I to get and around And relative to consumer potentially I’m they continue COVID how getting growth, guide you making changes Did from the terms FMI? shop to through engine of out think we want behavior acceptance initiative, to a the recommendations coming have I traffic consolidation, focus growth of your compounding some customers back Have vendor your guys store, recommendations that Great. want to the of and legacy wondering drivers your in normal, marketing that the just sense with place? to kind of of assortment changed? surveys

Scott McPherson

some them. I number FM’s, to to would be doing be definitely that I Yes, be COVID say that’s engagement that, an did question, engagement great a in and store impact an I to naive and impacted in that FMI, the think just not think impact it dramatically, ways, the but mean time of it’d didn’t able some a to extent. when communicating out all And that have you’re FMI. Ben.

a down were only say, our little category management last I’d really year allowed I from think also us to last tools. bit note, a not our positive So rates retool acceptance but FMI, year.

schematic using year better Yonder. in ago. intel ability provide, a was And customers, We’re multitudes Blue is now than to our it a to

standpoint, skip on by think we’ve So we’ve And tools results to then solutions how from that added they’re PDI, then, a I way our first come toolbox. to help the quarter, really a the I and encouraged loyalty early lot also, tools long them think added organization, of we’ve other And through there. really I’m the a of payment the executing. sales

think us retool. So I last and yes, also to allowed really impacted, but reposition think year it was I

Ben Bienvenu

in hop for All back right, great. one and then quick queue. the I’ll me, one And then

How rates, delivery how from do to this present sales versus yourself inbound do supply You about you chain it with to talked about notable fill And you you building think? stimulus-driving inventory it disruptions? has do maybe COVID Does and think of risks challenges. talked absenteeism? insulate to try are year, absenteeism any much

Scott McPherson

Yes.

materially run a perspective run stocks, about out on through better little fill COVID, between manufacturer since today, the Ben, Really, you it the the So region XX% gotten manufacturer give on height to X% of hasn’t we depending the we five of somewhere on of depending rates. Historically, and of stocks. manufacturer, really and out country.

we impact has good. items substitute about items So prepared because isn’t we their to it talked definitely a as to. material supply we’re we’re remarks, where on our inbound. our find situations, in customers some schematic using in sourcing having the And just building And have chain inventory, those change are secondary in on good a we

So been has that challenge. certainly, supply chain, a

that then, exactly you the Ben? repeat again, be a stimulus, much Can think year. And on of your question I what to it’s going this second challenge – of through ask

Ben Bienvenu

and You companies, well, absenteeism, of about We’ve the hearing absenteeism. this as talk talked seen lot about to we’re system of our creating COVID the contributing in other companies well. presumably as also disrupting in a but stimulus supply all chain

Scott McPherson

I never Absolutely, talk call for they’ve around right heard again, ago. on to true. think hearing that’s in of remarks, and asked, I’d drivers calls, we availability our four a And staffing about warehouse, that whole workforce career.but they’re my I we investor investor the somebody days five and listened and said, they’ve say, or have they heard heard another always noise now. couple I

transportation makes workforce. rates that situation, the warehouse unemployment drawing, it employment are on on draw with really the the really, to able think and tough stimulus, people they’re I combined and

more the supply doing done combined. around in impact than last has or an we’re challenge. and It is staffing three definitely hiring the a years definitely that we’ve And four think So chain. on I

Operator

do from We from question our Kelly Capital. next have BMO Bania

Kelly Bania

and levels? starting last $X million was stronger than giving just Just stamp were be think I quarter basis.but like I similar for guidance? gain to tax a roughly what’s million this more instead year $X And EBITDA get partially on raise seem does curious, to maybe, expected. you offset, the out net of pause to you so guys that the planning maybe

that there’s really it’s or things So standing two one out early year? just you just too or curious in the to pause, are if give

Scott McPherson

Kelly, confidence. definitely into built gives have off a say First I of the wouldn’t lot That of it us we in I’d plan. say we our definitely a said, have shot year. that we was a the a arm. That not patterns more in And tax guidance profit lot been inflation the probably of make our QX. changes smallest historical year. specifically in is, that after it is had to quarter. than increase so our quarter first built Colorado the It’s but It’s in, confidence

So want what we definitely we QX will at in again that to and do decide then. look

Kelly Bania

that terms sales? And in any on fill more on of color And that – Okay. impacting Just, you update point? rates, categories any specific how that that’s your see

Scott McPherson

rates probably been cigars. I’d It’s smaller just surprising, a It’s pre-COVID Outside of a there’s it’s COVID. across key not that, manufacturers. were one categories, it’s major a category of after have some say, stands out it’s Cigar and challenge that Kelly. manufacturers. of challenge number fill and our if different disproportionate

So cigars. and portion category of obviously, that are delta. And the working a we’re ones focused a that manufacturers specific on up we make it’s other have with that day-to-day.but those not big dozen than really any

Kelly Bania

just you a – tailwind How be expecting expecting you? manufacturers Are half? Okay. what in Or under guess, above could understand, quarter you in and of compares price more impact hearing that you your to are increases is there second on with to And you that belt, what to the what from and think That’s beyond us how just another are that I help topic the expected? And can plan? you helpful. that inflation, just are you the

Scott McPherson

that Yes, would planned the quarter, than inflation through disproportionate. other lot than maybe material first that, I inflation think cigarette I increase, historical.but product any this I inflation. signs of than anything that. year, other we I expected hearing say say say really, everybody’s really would higher wouldn’t greatly of a didn’t little we a noise we about obviously, price see

there So will I anticipate do some. be

the expect as a haven’t move I up seen through but yet. whole we pick we tailwind a maybe So little year, lot

still Kelly? there, You

Kelly Bania

Yes.

Operator

Jefferies. And Fishbein we question do next our have from Matt from

Matt Fishbein

the up around follow just labor environment. question Ben’s to Wanted on availability

We calls problem there, than bigger would going forward feeling, from similar have and potentially the hearing has that it it been the industry out from may past.but in industry, industry to industry. looks different be a to drivers behind tightness point is many different on been recent bit probably the

for know perspective, as know industry, force to the industry shock labor of of is maybe is of competitors, impacting but relates large stepping more drivers what the situation macro Core-Mark’s a hearing aging of in system, company, is just big a Or, companies to pointed by and because it to Is more driven you ideas, in dynamic, from I my recently the it the pandemic same So certainly the to other from that availability couple perspective. stimulus, too? Wanted skillset? your are interested it from Those the specifically? to outside driver. speak? more the shortage, And maybe a the push competing so it are

Scott McPherson

Yes.

are of is available. math the think I a lot pay a lot right chain, now indexes couple highest warehouse is that the to supply that in that so product across warehouse because rates country. people which that edging in points, happens, space And demand store much a think right products and move couple comes say And really of there’s touched around. so be show is workforce. just and And spaces of of to slightly I’d Matt. means a a and occupancy availability. I its I’d occupancy now I And demand but too, the thing you key buy much The I tough tell you’ve attention warehouse that warehouse – is say driver fractures when and one And a few warehouse can demand might from availability that on think to good decades, there’s I space. that increases that the in trying for driver at warehouse

has is the that space Other mean are certainly obviously months. space think XX last I that players So warehouse –. in – I leased up Amazon, over the the the half in country

that out And probably the So for we of it’s have XX% regional I’d for divisions other We is challenges. there our a say other up us. definitely make competitors little thing workforce. more have five

And exerting are so where recruit to and certainly try people. markets there’s more certain we resources

Matt Fishbein

it you’re in just to a one allocation just the CapEx up it of a process it’s facilities that, follow the kind building. to and of sounds And relocating there, of at your looks on pre-existing looking distribution move

that bit. So to opportunities a for impact you’re are you forward? Do is headwind warehousing going feel Or to as or when looking your variable company to going step touched this on you, a leasing? on Just the in gas future logistics your of that expand this, asking rates see the a necessarily any others to optimize are is of the like renegotiating environment footprint? you kind more expand doesn’t

Scott McPherson

us say standpoint think would the profitable Oregon. a mean and of a for we’re we I things. building I last the expansion to moved acquisition obviously from and on grow. growth efficient couple most We in way focused year that’s and Yes,

and focus didn’t be to acquisition. buildings put that they our expansion that I optimize. were growth is were one going to to of buildings you this and matter another and an in that going But still we on were that capital employee would our favorable simply of that’s were year, moves we’re that have from locations We part plan. Both standpoint, what technology them through those were just for really weren’t evaluating more say

Matt Fishbein

one. And Cool. last helpful. one That’s

I component rates sequentially to drop better the out pandemic, travel a wanted that normal your how since And of in How look levels, and is business travel to beginning size be business XX% relative As that maybe to drop just of airlines bit certain the related to a in on the pointed and the the it our year. march relates looks check one trending? out think markets. of of back

Scott McPherson

us are sales. our sizes drop non-cigarette for Obviously really by driven

drop So what going see sizes drives down sales drop our increase. to start size. our Because store quarter, when have non-cigarette and start for our to March we to growth, sizes drop were really you’re lap the for that’s same

We month on overall look to quarter the spike airlines, comment absolutely! very gets I’d to segment, quarter, have it’s a been I for I to convenience in and three seen airlines. month, back recover, But Your slower market quick last at in airlines quarter. our jumped non it or say as And four that better sure. although would months, every month have every and the over disproportionally say volume

Operator

John Instructions] do from the Lawrence Benchmark. question [Operator have from We next

John Lawrence

Just a of questions. couple

Let you out about me these operators there. ask

And mentioned us and of kind COVID and of helping. that. of came got challenges you to of need post these attention how a before them. PDI, Give help guys? technology sense the You’ve and COVID. And – can examples through through us that’s of initiatives, maybe there the going response some trying a the guy mean, you get new to sales the they some all this in now obviously Do help? sense a What I they Give after.

Scott McPherson

Yes John.

Let me two it buckets. into break

I can really where help think there’s we two buckets them.

and of advanced seen is there our this vendors Blue Yonder. we all – product is a product all I basis out they on in work we four of And at build as and this say changes those mix them to COVID the schematics we’ve saw dedicated schematics we’ve other product From a folks one’s year. have Blue lot mentioned of of a were One optimize I’d technology. kind develop significant do schematics. And regular Yonder through selection earlier that the and changes with selection year. changes We standpoint, our

mix five we And working five had really opened that of our folks product groups, back excellence now so a of we’ve we’re store. in optimize their people visiting that working different month, have up. really to center hard but this lot in and We

their on a I COVID retail of that I other make thing And The more did experience store, think to able you that elements. from that and check start Pump, And got is you frictionless. Skip that is that out from a on where that. to have in our the checkout, partnership a think can whether essentially technology have loyalty admission standpoint they order customer can that path PDI automated they whether means with have be they you’ve to can an whether the play, now means price phone, adding do whether means they’re a convenience the

those talked And we chain. but retailer, store customers first of things small a just we up All about for to size for chain. also signed medium an mentioned, I our independent PDI XXX

So them critical so space the is be they efficiently technology customers future their into I think more getting to of for our the service going can ourselves and convenience.

John Lawrence

Great. That’s real helpful.

COVID, issues, now these labor chains these of Through chain supply you’re independents you’re issues. Secondly, can about, facing and you talk a – obviously some bit little facing

be of before all tunnel continue make move than a some I’d the to do end this? then of more and little may to – that light say talk bit M&A, ready the discussions a at a little you guys see with As these of you they

Scott McPherson

on I’ve mean, I John. prior Yes, calls, sit

and seen people and their so make conversations my the think will those know accelerate I prospects. events And I challenging I of year. there probably coming times. and think when I’ve business would convenience that this, pay of there of you catalyst evaluate conversations conversations makes number most thing to some wholesale long a are that But and it how in kind most we event I one wholesaler And I them months the you were environment say, of what like multi-generational are them I is, the have a of be this do well the through want is had. those I’ve for a think through folks think COVID. And there. mean to to reasonably that’s that get over that out event number fared do be took of their loans that most an this an is this? able

Operator

this at questions it final over time. And going no I’m have David remarks. to further for to turn we

David Lawrence

Thank morning. We you this for in interest joining Core-Mark. your appreciate all us

reach any contact Thank feel our through have questions, follow-up you If IR to free me you. on please our out website. to

Operator

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

may You now disconnect.

Core-Mark Hldg (CORE) 8 May 212021 Q1 Earnings call transcript