For the second consecutive quarter, lower product prices had a pronounced effect on net sales for Builders FirstSource (BFS). Net sales in the third quarter of 2019 decreased 6.5% year over year (YOY) to $2 billion, after sales decreased 8.9% YOY in the second quarter. The decrease in net sales for the dealer can be attributed to a decrease in lumber and lumber sheet good prices, according to BFS’s third quarter earnings report.
BFS, however, experienced an increase in net sales in all other product categories. An additional sales day in the quarter increased net sales 1.5% compared to the third quarter in 2018. Sales volume per day in the single-family market grew by 9.3% YOY for BFS, volume per day in the repair and remodel sector grew by 10.7% YOY, and sales volume per day in the multi-family market grew 5.8% YOY. The valued-added product categories grew sales volume by 11.2% per day, including 14.5% in manufactured products and 7.7% in windows, doors, and millwork categories.
Despite the decline in net sales YOY for BFS, net income for the Dallas-based dealer increased 6.6% YOY to $78.1 million.
“Our team delivered an impressive performance in the third quarter, producing above market growth in sales volume driven by increases across all of our product categories,” CEO Chad Crow said in a prepared statement. “We continued to see attractive returns from our strategic investments in manufacturing capacity, with double-digit volume growth in value-added products outpacing overall sales volume gains and elevating margins.”
BFS further strengthened its market position with the acquisition of three truss manufacturing facilities in Arizona and Nevada in July 2019, expanding the dealer’s geographic footprint to 77 of the top 100 metro areas in the U.S., according to Crow.
The dealer’s gross margin increased by 3.5% YOY to $541.1 million. Gross margin percentage for BFS grew 260 basis points from the year earlier period to 27.3%. BFS attributed the increase in margin percentage to an improved product mix, the impact of commodity cost relative to customer pricing commitments, and a focus on pricing discipline. Outsized growth in higher margin, value-added product categories keyed the product mix improvement, according to the dealer.
BFS delivered a 13th consecutive quarter of YOY increases in adjusted EBITDA, Crow said, achieving a quarterly record of 8.1% of net sales.
Sales, general, and administrative expenses as a percentage of sales in the third quarter of 2019 was 20.8%, an increase of 1.9% YOY.
BFS ranked as the second largest company on the 2019 ProSales 100. The dealer operates approximately 400 locations across 40 states.
