A soft quarter for B2B But computer marketers report double-digit sales gains What a difference a year makes. In last year’s second quarter, nearly all of the business-to-business and computer catalogers tracked by investment bank Ulin & Holland for Catalog Age reported sales gains well above 10%. This year, although all but one of the computer mailers enjoyed double-digit sales gains, only four of the b-to-bers did. What’s more, three of the remaining eight business catalogers saw second-quarter sales decline this year.
Uncertain economic conditions in several market sectors hurt some of the catalogers, says Jim Adams, managing director of Boston-based Ulin & Holland. For instance, JLK Distribution Direct, a Latrobe, PA-based cataloger that sells industrial cutting tools, partially weakness in its U.K. and German markets for its dip in second-quarter revenue, from $127.8 last year to $127.7 million this year. Worse, JLK’s net income plunged 49%, to $2.6 million from $5.1 million last year.
Several b-to-bers that posted revenue gains nonetheless saw their net income decline or turn into a loss. “Some business-to-business companies, such as Moore Medical and Sport Supply Group, made substantial investments in Internet technology to derive future sales from the Web,” Adams says – investments that boosted expenses and thus hurt profitability. (For more on Moore Medical’s strategy, see “Web is Rx for Moore Medical,” page 12.)
Second-quarter operating expenses at Dallas-based athletic supplies marketer Sport Supply Group jumped a whopping 35%, from $6.8 million last year to $9.2 million. The reason: The company bought a management system that allows real-time order-tracking and account information to customers ordering from the Internet.
Sport Supply’s sales increased 10%, to $29.0 million for the quarter from $26.3 million. The company still ended up in the red, though, with a net loss of $329,000, compared with net income of $1.8 million last year. But given that Sport Supply’s annual mailing costs are about $4.5 million, says president John Walker, the investment in the company’s Website should pay off in the long run. “We expect to achieve significant reductions in catalog expenditures and cost savings within the company’s infrastructure as our customer base migrates to the Internet during the next several years,” Walker says.
In terms of revenue gains among the b-to-b catalogers, the big winner was Hunt Valley, MD-based Tessco Technologies. The supplier of wireless voice and data products posted a 44% increase in sales, to $62.5 million from $43.5 million last year. Tessco’s income increased too, by 31%, to $1.6 million from $1.2 million.
Computer catalogers cranking In the computer segment, only professional software cataloger Programmer’s Paradise saw sales decline. And although Creative Computers/ IdeaMall, like Programmer’s Paradise, ended the quarter in the red, Creative had at least managed to reduce its loss 8%, from $3.8 million last year to $3.5 million. But Shrewsbury, NJ-based Programmer’s went from net income of $963,000 last year to a net loss of $1.0 million this time around. The cataloger blamed its performance on continued Y2K-related weakness in Europe.
On a happier note, a 49% jump in Internet sales, to $30.5 million, led Multiple Zones to a 39% overall hike in revenue, from $121.5 million to $168.7 million. But more impressive was its swing in profitability: After losing $1.1 million during the second quarter of ’99, the Renton, WA-based computer cataloger reported a profit of $285,000.