HD Supply Holdings 1Q15 Earnings Call Notes

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Haven’t seen a major change in deflation dynamics

“deflationary environment. We have not seen a material change in the deflation environment versus our last call. As we previously stated, we sell relatively few pure commodity products.”

Haven’t been able to take price either

“We have not seen a material change in the pricing environment either. It remains challenging as it has for the past several years. We delivered 40 basis points of gross margin expansion, driven by our category management initiative. As I mentioned, flat gross margin rate year-over-year performance is good, and gross margin expansion is great.”

Construction rebounding, MRO stable, residential recovery

“We believe the construction end market continues to recover. As we discussed previously, we believe non-residential activities strength is solid in most of our priority districts now and we saw gradual improvement over the past year with strength widening across the country. The MRO market remains stable. Infrastructure markets continue to be sluggish but marginally better than last year. And residential is showing characteristics of more moderated extended recovery. The most recent housing data aligns with our view, showing single-family starts up approximately 8% on a year-to-date basis through April.”

Have seen select, but not broad weakness in oil and gas

“We have not seen a broad-based impact to our business from oil and gas at this time. We have seen select weaknesses in our fusible pipes, our plastics initiative in Waterworks, select power solutions industrial-oriented customers in the central part of the country and certain branches in Western Canada. Additionally, our year-to-date performance in Texas has been mixed across various cities and business units.”

Weather was an issue

“Weather was certainly an issue during the majority of our first quarter. For HD Supply, we estimate approximately 180 branch days were impacted due to full or partial closings in the first quarter 2015. In total, we estimate that HD Supply sales growth was adversely impacted by approximately 100 basis points during the quarter. Waterworks was most impacted as the customers are most sensitive to ground conditions to perform their work. Snow, below freezing temperatures, rain and mud are all not conducive to underground activity.'”