Core & Main (CNM -23.40%) reported its fiscal second quarter ended Aug. 3, 2025, earnings on September 9, 2025, lowering full-year revenue and EBITDA guidance for fiscal 2025 due to unexpected residential market weakness but highlighted resilient municipal demand and progress on cost containment. Residential sales are now expected to decline by low double digits through the end of 2025, offset by strength in municipal and select non-residential segments, with SG&A initiatives and M&A synergies anticipated to yield greater benefits in fiscal 2026. The following insights synthesize management commentary on growth drivers, operating leverage, and strategic execution directly affecting Core & Main’s long-term investment outlook.

Municipal strength offsets Core & Main’s residential weakness

Municipal water infrastructure demand remains robust due to increased funding and a multi-year replacement cycle, providing resilience against cyclical residential softness. Management noted positive momentum in treatment plants and high-density polyethylene (HDPE) product lines, while municipalities benefit from improved rates and healthy local budgets.

“The municipal market remains strong with ample funding, and we’re seeing a lot of demand there too. Those are kind of the puts and takes on the top line with the revised guide.”
— Robyn Bradbury, CFO

This dynamic illustrates the company’s balanced end-market exposure and positions Core & Main to capture secular growth from public infrastructure investment even as near-term residential lot development decelerates.

Margin management actions to drive 2026 profitability

SG&A (selling, general, and administrative) expenses rose 13% year-over-year, with about half attributable to M&A and one-time costs, while controllable spend reduction efforts and synergy realization from prior acquisitions are ongoing. Specific inflation-driven areas, such as insurance and compensation, contributed significantly to cost headwinds, but targeted workforce management and cost-out actions have been implemented, with major benefits expected beyond 2025.

“Some of those inflation items were a lot higher than we were expecting, and that’s what we need to work to offset. We’ve got several million dollars of cost-out actions that have been executed in the first half of the year. I would say we’ve got a meaningful amount of actions that are in process that we’re working through.”
— Robyn Bradbury, CFO

Core & Main expands Canadian footprint to unlock new growth

The company completed a three-branch acquisition in Canada, building on its earlier entry into the market and setting a platform for both greenfield branch expansion and further local M&A. Each acquired Canadian branch carries an approximately $15 million revenue run rate, diversifying the company’s geographic revenue base and advancing its multi-lever growth strategy beyond the U.S. market.

“the acquisition we did in Canada was a three-branch acquisition with two locations around Toronto and another one in Ottawa. Those, I would say, those branches are typical kind of branch size for us in kind of the $15 million range. Really excited about that one. It really builds a great platform for us to grow from in Canada. That’s now the second acquisition we’ve completed there.”
— Mark Witkowski, President

This cross-border expansion signals increasing addressable market opportunity and serves as a meaningful long-term complement to Core & Main’s organic U.S. pipeline.

Looking Ahead

Residential sales for the full year are forecast to decline by low double digits through the end of 2025, with municipal and select non-residential segments maintaining positive momentum. Gross margin rate is expected to remain stable versus fiscal second quarter ended Aug. 3, 2025, levels for the remainder of fiscal 2025, while SG&A expenses are projected to decrease in the second half of fiscal 2025 due to cost actions, with the bulk of synergy and efficiency gains materializing in fiscal 2026. Management confirmed the recent Canadian acquisition is not included in current guidance and referenced a strong M&A pipeline as a continued strategic focus.