Overall, the first quarter of 2002 was a lackluster one for the business-to-business and computer marketers tracked by Catalog Age. Only 54% managed to boost their bottom line from the previous first quarter, compared with 71% of those tracked a year ago. And just 46% increased their sales, compared with 64% last year.
Adding insult to injury, with the exception of dental, medical, and veterinary supplies cataloger Henry Schein, not one marketer posted more than 3% sales growth. Even Schein didn’t manage to achieve double-digit growth. And of the six catalogers of computer products, only one — CDW Computer Centers — showed any revenue increase at all.
“If the house file is not responding, marketers have been cutting back on mailings to prospects to protect the bottom line,” contends Jim Adams, managing director of Wellesley, MA-based investment bank Tulley & Holland. But protecting a publicly traded company’s bottom line for fear of shareholder reaction can come back to haunt marketers, Adams warns, because the “growth generated by sales is not there.”
SPOTLIGHT ON FIRST-QUARTER FINANCIALS
Healthy Profits at Henry Schein
Quarter ended: March 30
Melville, NY-based Henry Schein improved its first-quarter bottom line 40%, increasing its net income to $19.7 million from $14.1 million last year. Net sales were $647.1 million, a 9% gain from $593.9 million a year earlier. Within its dental supplies group, sales rose 10%, to $295.3 million. Sales of medical supplies grew 15%, and veterinary sales increased 8%. Combined medical and veterinary sales reached $231.4 million. (Henry Schein now reports veterinary revenue with that of the medical division.) International net sales were $105.8 million, a 3% increase in U.S. dollars and a 6% increase in local currencies.
The skinny: Due to increased competition in the online medical and dental supplies arena, Henry Schein will invest more funds improving the “performance, features, and reliability of [its] Internet content and technology,” according to a statement.
Earnings Improvement Loud and Clear at Tessco
Quarter ended: March 31
Wireless communications products marketer Tessco Technologies saw earnings increase more than sixfold, with revenue growth of just 3%. The Hunt Valley, MD-based company’s net income surged to nearly $1.4 million from $220,300 for the first quarter of 2001. Revenue was $62 million, up from $60 million a year ago.
The skinny: Tessco says its Website continues to build customer loyalty and sales while reducing its order entry and customer service costs. The Internet now accounts for about 15% of Tessco’s sales.
Programmer’s Paradise Posts Profit
Quarter ended: March 31
Programmer’s Paradise’s decision to no longer sell Microsoft Select and Enterprise license agreements contributed to a 28% tumble in the company’s first-quarter revenue. Net sales fell from $24.2 million a year ago to $17.4 million. Nonetheless, the cataloger of technical software and hardware turned around last year’s first-quarter net loss of $156,000. The Shrewsbury, NJ-based mailer posted net income of $98,000.
The skinny: The impact of the change in the reseller agreement with Microsoft is expected to reduce Programmer’s sales for the entire year.
NEBS Grows Income Despite Flat Sales
Quarter ended: March 30
Despite all-but-flat sales of $132.9 million, business forms and apparel mailer New England Business Service (NEBS) reported a 31% increase in first-quarter net income, to $4.6 million from $3.5 million last year. Results include $207,000 of after-tax costs related to previously announced restructuring actions, compared with $917,000 of such costs last year.
The skinny: Groton, MA-based NEBS cut costs considerably to improve its profit. For the three months ended March 30, total costs were a scant $335,000.
Backorders Bite into PC Mall’s Income
Quarter ended: March 31
Torrance, CA-based PC Mall reported a 3% decline in first-quarter sales, to $191.5 million from $198.4 million last year. Worse, the company’s net income tumbled 71%, from $1.2 million last year to $356,000. The reseller of Compaq, Microsoft, Apple, IBM, and Hewlett-Packard computer merchandise blamed a 54% increase in backorders of recently introduced products for the decline in both sales and earnings.
The skinny: The cataloger continues to focus on outbound telemarketing, implementing software tools to improve call center monitoring, lead generation, sales reporting and contact management. And in April the company acquired ClubMac catalog parent company Pacific Business Systems, which derives the majority of its sales through outbound telemarketing.
CDW Boasts Record First-Quarter Revenue
Quarter Ended: March 31
First-quarter sales at Vernon Hills, IL-based CDW Computer Centers surpassed $1 billion, making this the largest first quarter in the company’s history. In comparison, sales for the first quarter of 2001 were $987.2 million. Net income rose slightly, to $40.8 million from $40.5 million last year.
The skinny: Even giants like CDW have to watch spending. The company slashed net advertising expenses 74%, to $733,000 from $2.8 million last year.
| REVENUE $000 | NET INCOME $000 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 12 Months Prior | Current Quarter | Improvement (Decline) | 12 Months Prior | Current Quarter | Improvement (Decline) | Info as of Quarter Ended | P/E (as of 5/14/02) | ||
| BUSINESS-TO-BUSINESS | Henry Schein | 593,895 | 647,093 | 9% | 14,132 | 19,730 | 40% | 3/30/02 | 22.65 |
| Moore Medical Corp. | 32,365 | 32,437 | 0 | (1,097) | 195 | NM | 3/30/02 | N/A | |
| MSC Industrial | 223,089 | 194,791 | (13%) | 14,350 | 8,680 | (40%) | 3/2/02 | 45.24 | |
| New England Business Service | 132,857 | 132,879 | 0 | 3,547 | 4,646 | 31% | 3/30/02 | 16.45 | |
| Systemax | 405,898 | 412,260 | 2% | 363 | 585 | 61% | 3/31/02 | 167.50 | |
| Tessco Technologies | 59,988 | 61,956 | 3% | 220 | 1,352 | 515% | 3/31/02 | 17.84 | |
| Transmation | 20,171 | 16,863 | (16%) | 655 | (1,210) | NM | 3/31/02 | N/A | |
| COMPUTER PRODUCTS | Black Box Corp. | 225,157 | 160,252 | (29%) | 17,106 | 12,948 | (24%) | 3/31/02 | 14.81 |
| CDW Computer Centers | 987,245 | 1,002,836 | 2% | 40,476 | 40,756 | 1% | 3/31/02 | 28.30 | |
| PC Connection | 301,775 | 236,160 | (22%) | 2,433 | (2,088) | NM | 3/31/02 | 90.91 | |
| PC Mall | 198,351 | 191,505 | (3%) | 1,232 | 356 | (71%) | 3/31/02 | 11.71 | |
| Programmer’s Paradise | 24,164 | 17,445 | (28%) | (156) | 98 | NM | 3/31/02 | N/A | |
| Zones | 161,169 | 99,848 | (38%) | 104 | 81 | (22%) | 3/31/02 | N/A | |
| MARKET INDICES | Dow Jones Industrial Average | 27.03 | |||||||
| Standard & Poor’s 500 Index | 42.73 | ||||||||
| Notes: Price-to-earnings ratios are from various sources NM = not meaningful NA = not available Source: Tulley & Holland |
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