A mixed quarter for b-to-b

Apr 01, 2008 9:30 PM  By

Among the publicly traded business-to-business merchants tracked by Multichannel Merchant, 2007 ended with some winners and some losers.

Year-over-year sales rose for all but three of the 11 companies, while four merchants incurred bottom-line losses. One cataloger — test, measurement, and calibration instruments distributor Transcat — posted flat net income.

Stuart Rose, managing director for Wellesley, MA-based investment bank Tully & Holland, says the results reflect the overall state of the economy. “The once consistent increases in revenue and net income have faltered and become a set of mixed results.”

As we proceed into 2008, the direction and the state of the economy will undoubtedly have a continuing effect on the financial results of these companies, Rose says. The successul companies leverage sales increases to greater increases in net income. “This observation holds true through all of the business-to-business catalog companies.”

For example, Zones experienced a revenue increase of 10% and a subsequent rise in net income of 27%. “This relation was also true for Henry Schein, MSC Industrial, and PC Mall,” Rose says.

Record results for PC Mall

Quarter ended: Dec. 31 The facts: Computer reseller PC Mall reported fourth-quarter net sales of $408 million, a year-over-year increase of 38% — and its largest revenue quarter ever. Compared to the same quarter of 2006, the Torrance, CA-based merchant’s consumer net sales surged 42%, its public sector net sales increased 37%, and its consumer sales rose 21%. What’s more, its net income was $4.6 million, up a whopping 169% over last year, and its gross profit was $47.9 million, up 41%. The skinny: Thanks, Mac. The company’s 21% increase in consumer sales was based in large part on the increased demand for Apple products in the marketplace, Rose says. What’s more, several large contracts won in 2007 helped increase the company’s public sector sales by 37%.

Bottom falls at Tessco

Quarter ended: Dec. 30 The facts: Wireless communications cataloger Tessco Technologies recorded $135.7 million in sales, an increase of less than 1% for the quarter. But the company’s net income took a hit, falling 13% to $1.53 million, compared to $1.76 million last year. Contributing to the disappointing bottom line numbers was a combination of a decreasing profit margin, and an increase in the effective tax rate from 37.5% to 38.9%, Rose explains. The company experienced a 2% decrease in profit margin, stemming from an 8.1% decline in the commercial segment’s profit margin due to pricing pressures. The skinny: To increase profitability moving forward, Rose says, the company will have to work to overcome the increasing price pressures in the commercial segment that are having a negative effect on the bottom line.

Zones finds groove in 4Q

Quarter ended: Dec. 31 The facts: Computer reseller Zones reported solid fourth-quarter results, not to mention for the year. The company’s net sales for the fourth quarter grew 10%, to $176.1 million, compared to $159.9 million in same period last year. What’s more, net income rose 27%, to $3.8 million, from $2.9 million. In addition to higher sales, the company’s gross profit margin increased by 10 basis points, and expenses remained flat, allowing for the year-over-year growth in net income, Rose says. The skinny: In 2007, the company invested in the development of a national field sales force, “which we believe holds significant promise as a foundation for future sustained growth,” Zones CEO Firoz Lalji said in a release.

Company REVENUE NET INCOME (LOSS)
12 months prior Current quarter Increase (decrease) 12 months prior Current quarter Increase (decrease)
($0000) ($0000)
Black Box Corp. 264,806 258,324 (2%) 10,493 8,286 (21%)
Deluxe Corp. 427,200 414,000 (3%) 47,500 40,200 (15%)
Henry Schein 1,475,064 1,717,470 16% 62,997 78,269 24%
MSC Industrial 402,012 437,554 9% 40,296 46,866 16%
PC Connection 431,866 489,607 13% 4,571 6,172 35%
PC Mall 295,308 408,007 38% 1,708 4,598 169%
Sport Supply Group 49,384 54,089 10% (871) 452 NM
Tessco Technologies 134,717 135,732 1% 1,765 1,534 (13%)
Transcat 17,240 18,440 7% 1,207 1,208 0%
Wayside Technology 56,840 47,112 (17%) 1,037 931 (10%)
Zones 159,919 176,109 10% 2,983 3,803 27%

Source: Tully & Holland