Non-cigarette sales increased 24.7%, according to Core-Mark Q1 financial results.
Core-Mark Q1 financial results for 2018, ending March 31 have been announced.
Core-Mark Holding Co. Inc. is one of the largest marketers of fresh and broad-line supply solutions to the convenience retail industry in North America.
“Core-Mark continues to make good progress in growing our non-cigarette sales, but a steeper decline in carton sales and a soft retail sales environment have presented challenges,” said Thomas Perkins, CEO. “I have complete confidence in this company’s and the industry’s ability to rebound from these current headwinds.”
“We remain focused on leveraging operating efficiency, and growing sales to new and existing customers using our core strategies,” said Scott McPherson, designate CEO and current president and chief operating officer.
First Quarter Results
Net sales increased 8.6% to $3.8 billion for the first quarter of 2018 compared to $3.5 billion for the same period in 2017. The increase in overall net sales was due primarily to the contributions from the acquisition of Farner-Bocken Co., the addition of Wal-Mart Stores Inc. and incremental sales to existing customers. The growth in sales was offset by a decline in cigarette carton volumes and the expiration of its distribution agreement with Kroger in 2017. Non-cigarette sales increased 24.7% while cigarette sales increased 2%.
The increase in non-cigarette sales was driven by net market share gains, including Farner-Bocken, Walmart and incremental food/non-food sales to existing customers. Sales in the General Merchandise and Other Tobacco Products categories had robust growth, driven by e-cigarettes and vaping products, while Candy sales grew approximately 58%, driven primarily by sales to Walmart. In addition, sales in Food and Fresh categories increased 16.9% and 13.6%, respectively, compared to the same period in 2017. Cigarette sales benefited from contributions from our Farner-Bocken acquisition, increases in both California excise taxes and cigarette manufacturer prices. However, sales for the quarter were impacted by a 4.9% decline in carton volume.
Non-cigarette sales were 33.3% of total net sales for the first quarter of 2018 compared to 29% of total net sales for the same period in 2017. Both cigarette and non-cigarette sales in the first quarter this year were affected by a soft convenience industry sales environment.
Guidance for 2018
The Company reaffirms net sales, Diluted EPS and Adjusted EBITDA guidance for the full year of 2018. Annual net sales for 2018 are expected to be between $16.6 billion and $16.8 billion. Diluted EPS for the year are estimated to be between $0.84 and $1.00 and Diluted EPS excluding LIFO expense are expected to be $1.13 to $1.29. The Company expects Adjusted EBITDA to be between $157.0 million and $167.0 million. Key assumptions include $18 million in LIFO expense, a 25% tax rate and 46.4 million fully diluted shares outstanding. The Company’s projections include cigarette inventory holding gains, but do not include any other significant holding gains. Capital expenditures for 2018 are expected to be approximately $30 million.