Holding the (Bottom) Line on Expenses

Not surprisingly, fourth-quarter 2001 sales for most of the publicly traded business-to-business and computer catalogers tracked by Catalog Age fell short of those for 2000. In fact, only three of the 13 companies tracked — medical and dental supplier Henry Schein, fellow medical supplies mailer Moore Medical, and wireless communications supplies marketer Tessco Technologies — showed an improvement in fourth-quarter sales. In comparison, 78% of the b-to-bers tracked had posted sales gains the previous year.

But for all of the talk about an economic slowdown and the fallout from Sept. 11, 46% of the 13 marketers tracked enjoyed bottom-line gains — nearly identical to last year, when half of the b-to-bers improved profits.

You can chalk up the better-than-expected profit picture to stringent cost controls and layoffs, says Jim Adams, managing director of Wellesley Hills, MA-based investment bank Tulley & Holland, which tracks the companies for Catalog Age.

“Some of these companies, such as New England Business Service, braced for the cutbacks,” Adams explains. “We saw many companies cutting back on marketing efforts, such as prospecting. We saw staff cuts. In a down economy like we saw in the fourth quarter, all expansion plans were put on hold.”

CATALOG AGE’S SPOTLIGHT ON FOURTH-QUARTER FINANCIALS

Earnings Plummet at PC Connection

Quarter ended: Dec. 31

Weak demand led to a disappointing fourth quarter for Merrimack, NH-based computer cataloger PC Connection. Net sales totaled $273.1 million, down 21% from $345.1 million for the fourth quarter of 2000. And net income tumbled 75%, to $1.4 million from $5.5 million.

The skinny: At least sales to the federal government, through its Rockville, MD-based GovConnection (formerly ComTeq Federal) unit, were solid.

NEBS Nips Expenses

Quarter ended: Dec. 29

Cost cutting at business forms and supplies cataloger New England Business Service (NEBS) helped the Groton, MA-based mailer weather a slip in sales. Revenue declined 5%, to $157.6 million from $166.5 million the previous fourth quarter. But net income increased 6%, to $9.3 million from $8.8 million.

The skinny: Chief financial officer Daniel Junius says lower promotional spending by companies led to a 3% drop in its apparel business, which includes the Premium Wear catalog.

Red Ink at Transmation

Quarter ended: Dec. 31

Rochester, NY-based Transmation suffered a 16% drop in sales, to $16.3 million from $19.4 million a year earlier. But the sales decline wasn’t the sole cause of the test, measurement, and calibration products manufacturer/marketer’s net loss for the quarter. Investments in establishing its Transcat Calibration Services CalLabs, which recalibrates the products that Transmation sells, were a factor, says chief financial officer Peter Adamski. The company lost $3.6 million for the quarter; the previous year, it had posted fourth-quarter net income of $84,692.

The skinny: Transmation took a $2.4 million asset-impairment charge for the quarter related to the sale of the assets of its Measurement and Control subsidiary.

Up, Up, and Away at Tessco

Quarter ended: Dec. 30

The good news: Fourth-quarter sales at Hunt Valley, MD-based Tessco Technologies increased 5%, to $65.0 million, from $64.0 million last year. The better news: Net income soared 52%, to nearly $1.4 million from $900,000.

The skinny: Web sales for the quarter jumped 86%, and the Internet now accounts for more than 10% of the company’s revenue.

Soft Market Hits MSC Hard

Quarter ended: Dec. 1

Melville, NY-based MSC Industrial Direct Co. felt the effects of the weak manufacturing sector. Net sales at the maintenance, repair, and operations supplier fell 15%, to $188.9 million from $221.9 million the previous fourth quarter. Worse, net income plummeted 40%, to $8.1 million from $13.5 million. Increased spending on sales and marketing contributed to much of that decline. In fact, the drop could have been worse: MSC says it had actually reduced total operating expenses during the past year.

The skinny: Despite the quarter’s weakness, president/CEO Mitchell Jacobson says MSC grew market share, adding 4,000 new customers.

Systemax: Back in Black

Quarter ended: Dec. 31

Port Washington, NY-based computer and industrial supplies manufacturer/marketer Systemax posted net earnings of $2.6 million — quite an improvement from the net loss of $9.5 million it had suffered the previous fourth quarter.

“The extremely competitive conditions in the PC marketplace and overall economic conditions contributed to lower sales and pressure on margins. We are continuing to bring our costs in line with the decreased level of business in North America,” chairman/CEO Richard Leeds said in a statement.

The skinny: The net loss for the fourth quarter of 2000 would have been “only” $7.5 million, were it not for a $2 million one-time liability charge, adds chief financial officer Steven Goldschein.

FINANCIAL REPORT
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 2/18/02)
BUSINESS-TO-BUSINESS Henry Schein 655,632 698,289 7% 22,188 27,136 22% 12/29/01 27.14
Moore Medical Corp. 30,809 33,163 8% (3,793) 317 NM 12/29/01 N/A
MSC Industrial Direct Co. 221,884 188,852 (15%) 13,505 8,134 (40%) 12/1/01 39.94
New England Business Service 166,475 157,632 (5%) 8,802 9,349 6% 12/29/01 13.98
Sport Supply Group 18,201 17,042 (6%) (2,228) (3,695) (66%) 12/28/01 N/A
Systemax 421,466 406,935 (3%) (9,452) 2,616 NM 12/31/01 N/A
Tessco Technologies 62,040 65,025 5% 900 1,371 52% 12/30/01 23.87
Transmation 19,418 16,301 (16%) 85 (3,618) NM 12/31/01 145.00
COMPUTER PRODUCTS Black Box Corp. 220,534 179,241 (19%) 16,774 16,869 1% 12/31/01 14.97
CDW Computer Centers 1,007,071 988,190 (2%) 41,999 41,945 0% 12/31/01 29.52
PC Connection 345,143 273,149 (21%) 5,488 1,387 (75%) 12/31/01 34.52
PC Mall 198,411 175,850 (11%) 2,399 2,177 (9%) 12/31/01 8.21
Zones 166,247 114,020 (31%) 96 (124) NM 12/31/01 N/A
MARKET INDICES Dow Jones Industrial Average 26.94
Standard & Poor’s 500 Index 28.47
Notes: Price-to-earnings ratios are from various sources
NM = not meaningful NA = not available
Source: Ulin & Holland

For the most up-to-date industry news, financial or otherwise, visit Catalog Age online at www.CatalogAgemag.com

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