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Coverage Initiation: Core-Mark Holding Company, Inc.
Core-Mark Holding Company, Inc. (CORE) recently joined The Value Line Investment Survey. The San Francisco-based company operates as a wholesale distributor of packaged consumer products to the convenience retail industry. It does so via a network of 26 distribution centers throughout Canada and the United States. The company also provides its customers with various distribution, logistics, marketing, and sales services. In addition, it distributes a line of national and private-label convenience store products to approximately 24,000 customer locations.
Core-Mark has just completed the acquisition of Forrest City Grocery Company. The deal provides the company with more efficient operating systems and an enhanced market presence. Furthermore, it ought to benefit from a new stretch of territory that spans from California to Georgia, with no breaks. The continuity makes this distributor more attractive to retail chains, since the southeastern portion of the United States operates more convenience stores than any other region in the country. In addition, the new locations will offer an opportunity to break into crucial Florida markets. All told, this addition augurs well for CORE’s top- and bottom-line prospects going forward.
Like many wholesale distributors, Core-Mark has struggled with cost controls of late. Elevated fuel expenses and dwindling consumer spending have threatened both margins and overall business performance. Moreover, food inflation pressures persist in the market, and coupled with decreased customer basket size and lower transaction counts, will likely lead to sluggish same-store sales in the near-term. However, the distributor is working on implementing a fresh delivery strategy, which should combat high prices at the pump, and updated pricing strategies to bolster sales.
Core-Mark Holding Company is likely to face continued headwinds over the coming year, a time period in which it has to successfully integrate Forrest City Grocery into its operations. Moreover, we expect it to shift its focus toward its private-label goods to widen margins and offset higher fuel costs. Core-Mark’s prospects could be lifted considerably if it is able to penetrate and establish a foothold in the key Florida markets. For this reason, potential investors may want to keep an eye on this company to see if conditions warrant a further look in the coming quarters.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.