Climbing Up from Rock Bottom?

Following last year’s dismal third quarter, sales and earnings for most of the publicly traded business-to-business catalogers tracked by Catalog Age are returning to form.

Of the 14 catalogers tracked, 57% posted third-quarter sales increases in 2002. Last year, a scant 13% of the b-to-b and computer catalogers posted sales increases.

Catalogers enjoyed bottom-line success as well. Only two companies, Port Washington, NY-based Systemax and Shrewsbury, NJ-based Programmer’s Paradise, reported losses. (And Programmer’s net loss of $210,000 was less than half of what it had lost for the third quarter of 2001.) By comparison, a full third of the catalogers had reported a net loss for the same quarter of 2001.

But every silver lining has a cloud. In this case, the short-term strategies that some catalogers have adopted to improve earnings, such as reducing circulation and slashing budgets, may hinder growth. “Of the 14 companies, only eight had increased sales, which suggests that most of the bottom-line improvement is coming at the expense of future growth by reduction of prospecting,” says Jim Adams of Wellesley, MA-based investment bank Tully & Holland, which tracks the companies for Catalog Age.

CATALOG AGE’S SPOTLIGHT ON THIRD-QUARTER FINANCIALS

Moore Medical is back in black

Quarter ended: Sept. 28

The numbers: Medical and surgical supplies cataloger Moore Medical reported net income of $643,000, a turnaround from the previous year’s third-quarter net loss of $126,000. Net sales increased 7%, to $37.0 million from $34.7 million. The New Britain, CT-based cataloger, which sells to hospitals, physician and dental practices, and medical-surgical organizations, benefited from gross profit margin gains, which the company attributes to improvements in product mix and supply-chain efficiencies. In fact, sales and marketing expenses fell more than $200,000 from the previous third quarter.

The skinny: Moore Medical is poised to post a profit for fiscal 2002 — its first annual profit in three years.

PC Mall boasts record 3Q sales

Quarter ended: Sept. 30

The numbers: Its acquisition earlier this year of cataloger ClubMac and solutions provider Wareforce helped computer reseller PC Mall increase its third-quarter sales 34%, to a record $230.1 million. In fact, ClubMac and Wareforce accounted for more than half of the Torrance, CA-based company’s revenue increase from $171.9 million. Catalog sales for the quarter increased 3%, while outbound sales to small and midsize businesses rose 40%. Net income rose 55%, to $764,000 from $493,000.

The skinny: Selling to the federal government can pay off handsomely. Sales within the PC Mall Gov segment rose 29% from last year.

Glad tidings from PC Connection

Quarter ended: Sept. 30

The numbers: After several tough quarters, computer reseller PC Connection has some good news to report. Third-quarter sales for the Merrimack, NH-based company rose 9%, to $341.0 million, while net income increased 8%, to $2.2 million. The company’s public-sector division, GovConnection, accounted for much of the revenue growth: Its sales increased 50%, to $96 million. PC Connection also reports that during the quarter it entered 314,000 orders — 6% more than the third quarter last year.

The skinny: The 9% sales gain is even more impressive considering that PC Connection distributed 24% fewer catalogs — 7.4 million — than it had during the third quarter of 2001.

Despite soft sales, NEBS boosts income

Quarter ended: Sept. 28

The numbers: Net income at business stationery and supplies cataloger New England Business Service (NEBS) more than tripled, to $7.0 million from $1.9 million a year ago. Excluding nonrecurring items both years, the increase isn’t quite so dramatic — $5.1 million from $4.8 million — but it is an increase nonetheless. The Groton, MA-based cataloger posted net sales of $128.9 million, down 3% from sales of $133.5 million for the comparable period of last year.

The skinny: According to the company’s financial statement, although sales were soft, NEBS “generated higher profits from favorable product mix and tight cost controls.”

Double-digit declines for Black Box

Quarter ended: Sept. 29

The numbers: Usually reliable Black Box Corp. took it on the chin in the third quarter. Net income fell 12%, to $15.0 million, compared to $17.1 million the previous year. That was despite a 16% drop in selling, general, and administrative expenses, to $38.6 million from $45.9 million for the third quarter of 2001. And revenue for the Lawrence, PA-based provider of computer networking products and services tumbled 17%, to $162.7 million, compared with $197.1 million last year. International revenue for the quarter fell 23%, from $78.8 million last year to $60.3 million this year. The multichannel marketer blamed the decline in revenue on the general economic dowturn.

The skinny: Though the cost of sales fell 19%, to $99.4 million, gross profit at Black Box for the quarter tumbled 15%, to $63.4 million from $75.0 million the previous third quarter.

FINANCIAL REPORT
REVENUE $000 NET INCOME (LOSS) $000
12 months prior Current quarter Improvement (decline) 12 months prior Current quarter Improvement (decline) Info as of quarter ended P/E (as of 11/14/02)
BUSINESS-TO-BUSINESS Henry Schein $659,774 $759,073 15% $25,195 $39,228 56% 9/28/02 19.26
Moore Medical Corp. 34,685 37,032 7% (126) 643 NM 9/28/02 18.33
New England Business Service 133,515 128,851 (3%) 1,854 6,974 276% 9/28/02 10.53
Sport Supply Group 28,245 26,087 (8%) (321) 22 NM 9/27/02 N/A
Systemax 370,636 372,139 0 257 (727) NM 9/30/02 N/A
Tessco Technologies 62,040 70,376 13% 900 1,169 30% 9/29/02 7.31
Transcat 16,326 14,445 (12%) (221) 505 NM 9/30/02 N/A
COMPUTER PRODUCTS Black Box Corp. $197,072 $162,731 (17%) $17,142 $15,035 (12%) 9/29/02 15.69
CDW Computer Centers 991,065 1,150,970 16% 43,235 54,894 27% 9/30/02 25.98
Insight Enterprises 490,150 854,003 74% 8,278 10,099 22% 9/30/02 10.29
PC Connection 312,885 341,039 9% 2,052 2,206 8% 9/30/02 79.14
PC Mall 171,904 230,075 34% 493 764 55% 9/30/02 9.26
Programmer’s Paradise 24,177 15,798 (35%) (428) (210) 51% 9/30/02 N/A
Zones 120,723 102,365 (15%) (257) 124 NM 9/30/02 25.75
MARKET INDICES Dow Jones Industrial Average 20.88
Standard & Poor’s 500 Index 33.46
Notes: Price-to-earnings ratios are from various sources
NM = not meaningful
NA = not available
Source: Tully & Holland

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