First Quarter off to a Fine Start

Consumer and Business Spending May Not quite be back to historic levels, but if the first quarter is any indication, the publicly traded merchants started the year right.

All but one of the 11 business-to-business companies tracked by Multichannel Merchant showed revenue gains in the first quarter, and all but two of the eight consumer merchants recorded year-over-year increased sales.

The average revenue gain was 16% for both the business-to-business and computer product sectors, says Stuart Rose, managing director of investment bank Tully & Holland. Tessco Technologies led gainers with 33% revenue growth, and Deluxe Corp. was the marketer with a modest 1% decline. Profits for these two merchants were even more impressive: Tessco’s bottom line rose 120%, to $1.7 million, while Deluxe’s net income was up 167% from the quarter in 2009.

The b-to-b segment has “clearly made great strides in improving operating efficiencies year-over-year, whereas the computer product segment appears to be struggling to keep costs under control, despite improving sales,” Rose says.

On the consumer side, the average revenue increase of the profiled companies was 4.9%, Rose says. Earnings results were mixed, but indicate moderate improvements in this sector. General merchant J.C. Penney, for instance, saw 1% growth for the quarter, but its net income surged 140%.

J.C. Penney is expanding its market share, albeit slowly, Rose says. “As value driven consumers continue to seek fashionable clothes at moderate price points, J.C. Penney has made strong efforts to align its model accordingly.”

Is the economic pain over yet?

With three consecutive quarters of year-over-year GDP growth through the first quarter of 2010, the progress of the economic recovery is encouraging, Rose says. “Consumer spending was a major driver of GDP growth in Q1, but GDP growth also continues to be fueled by inventory replenishment,” he notes.

“We do still expect periods of spending inflections and volatility as the economy continues to recover slowly,” he adds. Despite the 3.6% increase in consumer expenditures, real disposable income was flat for the period.

Government spending, including stimulus programs, helped to inflate this metric, Rose says. “Consumer spending growth is anticipated to be less in the second quarter of 2010 than in first quarter of 2010.”

Company REVENUE NET INCOME (LOSS)
12 months prior Current quarter Increase (decrease) 12 months prior Current quarter Increase (decrease)
($000) ($000)
1-800-Flowers.com 154,479 155,513 1% (65,775) (7,296) NM
Black Box Corp. 241,332 240,883 NM 8,350 7,496 (10%)
Coldwater Creek 228,367 243,086 6% (7,562) 2,322 NM
Delia’s 52,097 49,961 (4%) (3,634) (5,825) NM
Deluxe Corp. 339,500 335,100 (1%) 12,500 33,400 167%
Gaiam 55,923 62,183 11% (3,090) (250) NM
Henry Schein 1,485,388 1,760,310 19% 54,851 60,900 11%
J.C. Penney Co. 3,884,000 3,929,000 1% 25,000 60,000 140%
Jos. A. Bank 161,925 178,125 10% 11,455 15,808 38%
MSC Industrial 351,910 395,482 12% 26,278 30,649 17%
PC Connection 326,221 408,262 25% (1,619) 2,434 NM
PC Mall 259,300 289,854 12% 1,011 173 (83%)
Sport Supply Group 63,761 65,539 3% 3,510 3,210 (9%)
Systemax 752,268 915,237 22% 8,698 11,751 35%
Talbots 327,912 315,925 (4%) (361,533) 4,090 NM
Tessco Technologies 98,222 130,555 33% 785 1,727 120%
Transcat 18,964 23,535 24% 556 869 56%
Wayside Technology 31,750 40,358 27% 578 623 8%
Williams-Sonoma 611,615 717,637 17% (18,705) 19,538 NM

Source: Tully & Holland

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