Businesses continue to boom

For the business-to-business and computer merchants tracked by Multichannel Merchant, 2007 is off to a good start: The majority turned in stellar performances during the first three months of the year.

Of the dozen companies tracked, all but one b-to-b marketer boosted sales; most had increases in the double-digit range. And all but two of those companies improved their year-over-year bottom lines.

All of the computer merchants posted gains in both sales and profits. “It was a strong quarter for b-to-b merchants and computer products companies, with a majority of firms showing growth in revenues and net income,” says Stuart Rose, managing director of Wellesley, MA-based investment bank Tully & Holland, which tracks public companies for Multichannel Merchant. “As the economy continues to grow, businesses are piling on the earnings. This may eventually lead to higher interest rates, which will dampen growth and valuations. People are beginning to wonder how long this bull market can last.”

Profits slip at Transcat

Quarter ended: March 31 The facts: The manufacturer/marketer of testing, measurement, and calibration equipment’s revenue jumped 17%, to $18.9 million. Net sales for distribution products rose 20%, to $12.7 million compared to $10.5 million after the fourth quarter of fiscal 2006. Net sales for calibration services increased 11.2%, to $6.2 million up from $5.6 million. But the company sustained an 82% decline in its bottom line, dropping to $489,000 from $2.76 million a year ago. The skinny: Transcat’s significant drop in net income is deceiving, since the company lacked a significant tax benefit this quarter, which helped boost earnings in the same quarter of 2006.

Bottoms up for PC Connection

Quarter ended: March 31 The facts: Third-quarter sales for the computer reseller rose 4.7% to $398.2 million, up from $380.5 million for the same period in 2006. For the three-month period, net income doubled to $3.4 million, from $1.7 million last year, and its gross profit increased by $3.5 million compared to the corresponding quarter in 2006. In a statement announcing third-quarter financial results, PC Connection chairman/CEO Patricia Gallup credited part of the company’s growth to strength in the small- and medium-sized business (SMB) segment. The skinny: PC Connection’s healthy balance sheet, coupled with an investment in infrastructure, keyed the quarter’s impressive performance for both operations and shareholder value, Rose says.

Wayside Technology on a tear

Quarter ended: March 31 The facts: First-quarter sales at computer reseller Wayside Technology Group, formerly known as Programmer’s Paradise, jumped 33%, to $46.9 million, compared with $35.4 million for the first quarter of 2006. Net income rose 68%, to $990 million from $591 million. Total sales for the Programmer’s Paradise segment — a reseller for software developers — fell 12%, to $10.8 million from $12.3 million. Sales in the Lifeboat segment — the company’s international wholesale division, which focuses on building partnerships with software publishing companies — soared 56%, to $36.1 million, compared to $23.1 million in the first quarter of 2006. What gives?

The company blamed the sales decline in Programmer’s Paradise to a “renewed focus on technical software,” and attributed the sales increase for Lifeboat to its expanding virtual infrastructure-centric business, the addition of several key product lines, and strengthening of account penetration. The skinny: The three-month period marked the company’s 15th consecutive quarter of double-digit growth. With net income growing at twice the rate of sales, Wayside continues to increase market share, Rose says. Gross profit and net working capital increased year to year while gross margin was down.

Company 1Q REVENUE 1Q NET INCOME (LOSS)
12 months prior Current quarter Increase (decrease) 12 months prior Current quarter Increase (decrease)
(000) (000)
CDW Corp. 1,588,629 1,859,118 17% 61,678 76,780 24%
Collegiate Pacific 59,418 63,235 6% 1,232 1,738 41%
Deluxe Corp. 411,400 403,800 -2% 24,700 35,200 43%
Henry Schein 1,161,781 1,334,143 15% 16,259 43,494 168%
MSC Industrial Direct Co. 305,927 404,618 32% 33,329 40,507 22%
PC Connection 380,478 398,180 5% 1,706 3,385 98%
PC Mall 234,222 256,780 10% (55) 1,868 NM
Systemax 574,908 676,122 18% 17,557 13,895 -21%
Tessco Technologies 96,561 127,015 32% 1,058 1,568 48%
Transcat 16,054 18,853 17% 2,765 489 -82%
Wayside Technology 35,362 46,922 33% 591 990 68%
Zones 133,998 148,182 11% 1,705 2,312 36%
Notes: NM = not meaningful Source: Tully & Holland

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