Commodity price deflation has hampered the sales at numerous LBM dealers in recent quarters. After deflation drove a 5.3% decrease in sales for BMC Stock Holdings in the second quarter year over year (YOY), it continued to have a negative effect on sales in the third quarter. Net sales for the Raleigh, N.C.-based dealer fell 2.6% year over year (YOY) in the third quarter of 2019. The effects of deflation, though, were partially offset by acquisition growth and core organic growth at BMC, according to the company’s third quarter earnings report.
Specifically, BMC estimates net sales decreased 10.5% YOY from commodity price deflation within the lumber, lumber sheet goods, and structural components categories and. BMC also claims net sales fell 1.1% due to the sale of its Coleman Floor business in November 2018. The dealer estimates net sales grew 3.9% from recent acquisitions, 1.5% from an additional selling day versus the third quarter in 2018, and 3.6% YOY from core organic growth.
In the three months period ending September 30, BMC completed three acquisitions, representing approximately $95 million in pre-acquisition annual sales. The company acquired Washington-based Kingston Lumber in August, and California-based Heritage One Door & Carpentry and Colorado Fasteners in September. BMC CEO and president Dave Flitman said the acquisitions will strengthen the dealer’s customer portfolio, product mix, and footprint in the company’s respective local markets.
Despite the acquisition growth and core organic sales growth, net income for BMC fell $2.3 million YOY to $33.6 million.
“Driven by our team’s continued focus on executing our strategy, we delivered another quarter of strong results with 3.6% core organic growth, significantly improved margins and strong operating cash flow,” Flitman said. “Share gains in our value-added product categories led to core organic growth in our higher-margin categories of 7.4% in Structural Components and 5.9% in Millwork, Doors and Windows.”
In addition to the core organic growth, Flitman also pointed to improved margins and strong operating cash flow when describing the strong third quarter performance for BMC. Gross profit increased 5.6% YOY to $254.8 million and gross margin increased 2.0% YOY to 26.4%. The gross margin improvement was primarily driven by improvements in margin within the lumber and lumber sheets goods category and the structural components category.
Adjusted EBITDA for BMC was up slightly YOY to $74.7 million. Adjusted EBITDA as a percentage of net sales expanded 20 basis points compared to the third quarter in 2018 to 7.7%.
BMC ranked as the 5th largest company on the 2019 ProSales 100. The dealer serves 45 metropolitan areas across 18 states, principally in the southern and western regions of the U.S.
