Stock under pressure: HD Supply Holdings Inc (NASDAQ: HDS)

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HD Supply Holdings Inc (NASDAQ: HDS) stock lost over 3.3% on 10th June, 2020 (as of  11:31 am GMT-4; Source: Google finance) after the company posted mixed results for the first quarter of FY 20. The company’s net income for the first quarter fell to $57 million from $102 million in the year-ago period. The company has not provided financial guidance due to uncertainties associated with the COVID-19 pandemic. The company generated strong free cash flow of $116 million during the first quarter, which is a 13.7% increase over the same period last year and ended the quarter with combined liquidity, $797 million, which represents an increase of $69 million from the end of fiscal 2019. The company has reduced the planned capital expenditures from approximately $120 million to $80 million for fiscal 2020.

Moreover, the impact from the COVID-19 outbreak has affected every sales vertical and every region in other business. No business vertical was more affected than hospitality, which represents about 18% of Facilities Maintenance sales. As business and leisure travel came to a halt, the hospitality customers were severely affected with many of them temporarily suspending operations. Hospitality business experienced a year-over-year level of fall in revenue of about 75% in April. However, there has been encouraging improvement in hospitality with year-over-year sales declines of about 48% in May.

HDS in the first quarter of FY 20 has reported the adjusted earnings per share of 67 cents, missing the analysts’ estimates for the adjusted earnings per share of 46 cents, according to the FactSet consensus. The company had reported 6.6 percent fall in the adjusted revenue to $1.40 billion in the first quarter of FY 20. The facilities maintenance sales fell by 11.7% to $682 million to miss expectations of $702 million while construction and industrial sales fell by 1.1% to $713 million to beat expectations of $684.3 million. Preliminary net sales for May were $431 million, which represents or an average daily decrease of about 7.3%, compared to decrease of 22.6% in April, a 0.5% increase in March and an 8.8% rise in February. Gross profit has decreased by 6% to $550 million for the first quarter of fiscal 2020, as compared to $585 million for the first quarter of fiscal 2019. Gross profit formed 39.4% of net sales for the first quarter of fiscal 2020, which represents an expansion of approximately 20 basis points from 39.2% for the first quarter of fiscal 2019.

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