Core-Mark Holding Company Inc., one of the largest marketers of fresh and broad-line supply solutions to the c-store industry in North America, announced financial results for the first quarter, which ended March 31, as well as its official headquarters relocation from San Francisco to Westlake, Texas.
Founded in 1888, Core-Mark offers a full range of products, marketing programs and technology solutions to approximately 44,000 customer locations in the U.S. and Canada through 32 distribution centers (excluding two distribution facilities the Company operates as a third-party logistics provider).
“Our results in the first quarter reflect continued progress on our key priorities and a solid start towards meeting our strategic objectives for the year,” said Scott E. McPherson, President and Chief Executive Officer. “We were pleased to deliver improved profitability in the quarter, including growth in higher margin non-cigarette sales to existing customers and operating expense leverage, and we are committed to executing on our top-line growth initiatives.”
First Quarter Results
Net sales were $3.75 billion for the first quarter of 2019, compared to $3.81 billion for the same period in 2018, impacted by the April 2018 expiration of the Kum & Go distribution agreement and transition of certain Rite-Aid stores.
Non-cigarette sales increased 1.4%, driven primarily by an increase in sales to existing customers led by the growth in alternative nicotine products, offset by a 4.3% decrease due to the loss of K&G and certain Rite-Aid stores. Non-cigarette sales increased to 34.3% of total net sales for the first quarter of 2019, compared to 33.3% of total net sales for the same period in 2018.
Cigarette sales decreased 2.8% driven primarily by a decline in cigarette carton sales to existing customers and a 2.4% decline due to the loss of K&G and certain Rite-Aid stores, partially offset by manufacturer price increases and market share gains.
Gross profit increased 4.2% to $208.2 million compared to $199.8 million in the first quarter last year.
The increase in gross profit was driven primarily by incremental non-cigarette sales to existing customers, including strong growth in alternative nicotine products and market share gains, partially offset by the loss of K&G and certain Rite-Aid stores, and a decline in cigarette cartons sold. Remaining gross profit, a non-GAAP financial measure, increased 3.9% to $206.4 millionfrom $198.6 million.
Gross profit margin increased 30 basis points to 5.55% of total net sales during the first quarter of 2019 from 5.25% for the same period in 2018. Remaining gross profit margin expanded by 28 basis points to 5.50% in the first quarter of 2019, compared to 5.22% for the same period in 2018, driven primarily by a shift in sales mix toward higher margin non-cigarette items as well as an increase in the overall margin for non-cigarette sales.
The increase in non-cigarette margins was driven primarily by the increase in sales of higher margin alternative nicotine products and higher margins in our Food and Candy categories.
Corporate Headquarter Relocation
The company also announced that it has completed the relocation of its corporate headquarters from South San Francisco to Westlake, Texas, effective May 18. The move is expected to improve efficiency, cost-competitiveness and collaboration, while providing employees with an exceptional work environment.