Boffo sales, so-so earnings for 3Q

Business is booming — sort of. Among the 12 publicly traded business-to-business merchants tracked by Catalog Age, all but one posted a rise in third-quarter revenue. That’s 92%, up slightly from 86% a year ago.

But while sales are up, the same can’t be said for profits across the board. Only half of the marketers reported improved bottom lines. “Companies had to spend to boost sales and will look to recover in future periods,” says Jim Adams, managing director of Wellesley, MA-based investment bank Tully & Holland, which tracks the publicly traded companies for Catalog Age. Still, 50% marks an improvement over last year, when only 43% of marketers posted bottom-line gains.

Sales up, earnings down at Tessco

Quarter ended: Sept. 26 The facts: Despite a 41% leap in third-quarter revenue, Hunt Valley, MD-based wireless products merchant Tessco Technologies suffered a 30% tumble in net income. For the third quarter of 2004, Tessco netted $1.6 million on revenue of $115.7 million. For the previous third quarter, it had reported earnings of $2.3 million on sales of $81.9 million. In the year-ago quarter, however, Tessco’s net income had included a $1.9 million after-tax benefit relating to the 2002 flooding of its logistics center. The skinny: After July 31, 2005, wireless service provider T-Mobile USA will stop using Tessco’s e-commerce marketing and sales system. T-Mobile programs accounted for 38% of Tessco’s revenue this quarter but only 19% of its gross profit.

Zones grows its bottom line

Quarter ended: Sept. 30 The facts: Auburn, WA-based computer reseller Zones boosted its bottom line a whopping 946%, to $1.4 million for the quarter, compared with net income of $134,000 for the third quarter of 2003. Net sales grew 15%, to $129.8 million from $112.7 million the previous year. Consolidated outbound sales to businesses and the public sector increased 19%, to $120.3 million. Public sector sales for the third quarter increased nearly 94%. One dim spot: Gross profit margins were down from 11.9% in the third quarter of 2003 to 10.9%. Chief financial officer Ron McFaddden blamed the decline on the public sector markets, which bought lower-margin products such as servers and software. The skinny: Net inventories at Zones increased to $17.4 million as of Sept. 30, up from $11.5 million for the quarter ended Dec. 31, 2003.

Record income for CDW

Quarter ended: Sept. 30 The facts: Vernon Hills, IL-based CDW Corp. enjoyed a 46% jump in net income, to $65.2 million — a record for the computer reseller. Third-quarter sales increased 24%, to $1.51 billion, compared with $1.22 billion in 2003. Direct Web sales — those processed without the assistance of a customer service rep — increased 44%, to $406 million. CDW’s public sector sales, which include federal government sales, increased 20%, to $414.8 million. Corporate sector sales hit nearly $1.10 billion, up 25% from $878.4 million in the third quarter of 2003. The skinny: CDW ended the quarter with $639.8 million in cash and cash equivalents and marketable securities — 21% more than the previous third quarter.

Sales up, profit up more at PC Connection

Quarter ended: Sept. 30 The facts: Third-quarter sales at Merrimack, NH-based PC Connection inched upward 1%, to $351.3 million. But the computer reseller’s net income rose appreciably more — 27%, to $2.8 million. Sales at PC Connection Sales Corp., which targets small and midsize businesses, totaled $195.9 million, a 9% increase from the third quarter of the previous year. Sales at GovConnection, which sells to the federal government, fell 25%, to $77.9 million. MoreDirect, which handles large accounts, totaled $77.5 million in sales, up 17% from the previous third quarter. The skinny: During the quarter, PC Connection mailed 6.9 million catalogs — 17% fewer than the 8.3 million books the company mailed during the third quarter of 2003.

3Q REVENUE 3Q NET INCOME (LOSS)
Company 12 months prior Current quarter Increase (decrease) 12 months prior Current quarter Increase (decrease)
(000) (000)
Black Box Corp. $129,268 $126,595 (2%) $12,051 $10,623 (12%)
CDW Corp. 1,222,785 1,511,054 24% 44,604 65,178 46%
Deluxe Corp. 314,900 485,000 54% 58,200 57,500 (1%)
Henry Schein 892,718 1,033,625 16% 44,347 31,504 (29%)
MSC Industrial 208,767 246,687 18% 13,691 22,264 63%
PC Connection 349,420 351,265 1% 2,180 2,817 29%
PC Mall 231,996 283,288 22% 703 210 (70%)
Programmer’s Paradise 18,355 26,788 46% 333 626 88%
Systemax 405,011 460,271 14% 1,907 2,692 41%
Tessco Technologies 81,929 115,690 41% 2,289 1,604 (30%)
Transcat 11,896 12,488 5% 355 (93) NM
Zones 112,697 129,829 15% 134 1,402 946%
Notes: Price-to-earnings ratios are from various sources NM = not meaningful Source: Tully & Holland

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