B-To-B Sales Stable, Profits Peter Out

Considering that the Economy Appears to be Going from Bad to Worse, the second quarter wasn’t too bad for the business-to-business and computer marketers tracked for Multichannel Merchant.

Of the dozen publicly traded merchants tracked, all but four showed year-over-year sales increases for the second quarter. Bottom line performance, however, was a bit more challenging: Only five companies achieved earnings growth. Medical, dental and veterinary supplies cataloger Henry Schein starred during the three-month period, recording 19% revenue growth and a whopping 94% gain in its bottom line.

“The current economic climate is making for some pretty choppy waters,” says Stuart Rose, managing director for investment bank Tully & Holland. “Sales in the second quarter were mostly up, though some just squeaked by in the single-digit range, but earnings growth was harder to come by.”

A not so Deluxe quarter


Quarter ended: June 30 The facts: Second-quarter sales at Deluxe Corp. — a financial services and check printing company — fell 8%, to $367.7 million, compared to $399.9 million for the same period last year. What’s more, its bottom line performance slipped 9%, to $32.6 million. The skinny: On top of the grim economy, “Deluxe is suffering from the long-term decline in check writing,” Rose says. Company officials predict single-digit declines in sales for the year. “Good foresight put them on an aggressive cost reduction and business simplification program, which in this quarter lowered selling and G&A expenses from 47.4% of sales to 45.3% of sales.”

Solid second for MSC Industrial


Quarter ended: June 30 The facts: Second-quarter sales for maintenance repair and operations supplies merchant MSC Industrial Direct increased 6%, to $457.2 million, up from $431.0 million for the same period last year. Net income rose 12%, to $51.3 million, compared to $45.7 million in 2007. “MSC Industrial saw sales gains come from existing customers in its large customer segment — national accounts and government,” Rose explains. The skinny: While Web sales account for 27% of total consolidated sales, Rose says, MSC company officials plan to add more field associates.

Sales, profits slip 18% at Zones


Quarter ended: June 30 The facts: It was a most disappointing quarter for computer reseller Zones. First, revenue fell 18%, to $158.3 million. Net income also sank 18%, to $3.6 million, down from $4.4 million. “Sales fell as its typically large customers scaled back on purchases.” Rose says. Part of the company’s problem could be that Zones did not cut expenses as quickly as others, “so its income followed its sales.” The skinny: CEO Firoz Lalji, who owns about 54% of the outstanding shares of Zones, is said to be moving to take the company private.

OF THE 12 COMPANIES TRACKED, SEVEN IMPROVED THEIR SALES FOR THE QUARTER, WHILE FIVE INCREASED NET INCOME
REVENUE NET INCOME (LOSS)
Company 12 months prior Current quarter Increase (decrease) 12 months prior Current quarter Increase (decrease)
($000) ($000)
Black Box Corp. 252,291 242,553 (4%) 8,188 12,833 57%
Deluxe Corp. 399,900 367,700 (8%) 36,000 32,600 (9%)
Henry Schein 1,387,017 1,644,977 19% 33,837 65,477 94%
MSC Industrial 431,057 457,238 6% 45,765 51,385 12%
PC Connection 441,122 449,399 2% 5,753 5,087 (12%)
PC Mall 262,958 331,182 26% 2,999 3,033 1%
Sport Supply Group 56,073 61,110 9% (302) 1,809 NM
Systemax 647,102 756,035 17% 13,762 13,541 (2%)
Tessco Technologies 124,430 122,068 (2%) 866 2,063 138%
Transcat 16,190 17,853 10% 238 228 (4%)
Wayside Technology 44,040 48,096 9% 959 823 (14%)
Zones 192,232 158,333 (18%) 4,409 3,626 (18%)

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