Stellar second quarter

Nearly all of the business-to-business and computer marketers tracked by Multichannel Merchant turned in superb performances during the second quarter. Of the dozen publicly traded merchants tracked, all but one showed year-over-year sales increases for the second quarter.

What’s more, only two — Tessco Technologies, a provider of wireless communications products and services; and Henry Schein, a medical, dental, and veterinary supplies cataloger — saw any bottom-line erosion.

Maintenance repair and operations supplies merchant MSC Industrial Direct and computer reseller Zones recorded the most significant revenue gains in the quarter. Revenue for MSC Industrial jumped 31%, to $431.0 million, while sales for Zones rose 32%, to $192.2 million.

Meanwhile, Torrance, CA-based computer reseller PC Mall registered a massive uptick in net income, checking in at nearly $3 million, or a 659% increase from $395,000 last year.

Stuart Rose, managing director for Tully & Holland, the Wellesley, MA-based investment bank that tracks the catalogers for Multichannel Merchant, says the results from the business-to-business and computer marketers were indeed impressive. “The direct marketing world had another strong quarter,” he says. But he cautions that these results came in “before the market tumble and the third quarter market volatility.”

Bottom line not so Scheiny

Quarter ended: June 30 The facts: Henry Schein’s sales for the second-quarter increased 16%, to $1.38 billion. Despite this revenue growth, Henry Schein experienced a 25% year-over-year decrease in net income. This decline in net income, Rose explains, was due to a recent decision by the company to divest its low-margin oncology pharmaceutical and specialties pharmacy units. “These businesses were not strategic to the medical group, and in their absence the company will be able to focus on the sale of more profitable products,” Rose says. “This affected net income when the company assessed its long-lived assets for impairment, which resulted in an after tax impairment charge of $20.6 million.” The skinny: Had it not been for the impairment charges, Rose says, the company would have experienced an approximate 20% year-over-year increase in net income.

All Systemax Go

Quarter ended: June 30 The facts: Second-quarter sales at computer manufacturer/marketer Systemax rose 18%, to $647 million. The company’s bottom line improved a whopping 94%, to $13.7 million, compared with $7.1 million in the second quarter of 2006. Rose credits the hike in profits to an increase in gross margin, from 14.1% to 15.3%. “Gross margin improvement was due primarily to less price discounting pressures for the company’s technology products.” Systemax attributed revenue growth to increased Internet sales, expanded and private label product offerings, and a competitive pricing advantage. “These factors were able to outweigh the 18.6% increase in the company’s SG&A expenses, which were due mostly to increased salaries and credit card fees,” Rose adds. The skinny: Despite these strong growth numbers, Rose says, the company “must be wary of its increased costs and constantly fluctuating pricing pressures.”

Going My Wayside?

Quarter ended: June 30 The facts: Second-quarter sales for computer reseller Wayside Technology Group, formerly known as Programmer’s Paradise, increased 6%, to $44.0 million, compared with $41.4 million for the second quarter of 2006. Net income rose 23%, to nearly $1 million, compared with $781,000 last year. The company’s two segments had varied performances, which affected net sales growth. Total sales for the Programmer’s Paradise segment — a reseller for software developers — fell 17%, to $10.4 million from $12.5 million. But sales in the Lifeboat segment — the company’s international wholesale division — increased 16%, to $33.7 million from $29.0 million. The skinny: Wayside’s net income may be growing, Rose says “but the possibility of future pressures on margins and other varying factors are on the minds of management. The effect of these issues could reduce the company’s gross margin below the levels realized this past quarter.”

2Q REVENUE 2Q NET INCOME (LOSS)
Company 12 months prior Current quarter Increase (decrease) 12 months prior Current quarter Increase (decrease)
($000) ($000)
Black Box Corp. $230,395 $252,291 10% $6,813 $8,188 20%
CDW Corp. 1,633,458 2,032,838 24% 73,111 80,091 10%
Deluxe Corp. 403,000 399,900 -1% -2,400 36,000 NM
Henry Schein 1,192,989 1,387,017 16% 45,218 33,837 -25%
MSC Industrial 329,817 431,057 31% 37,018 45,765 24%
PC Connection 408,094 441,122 8% 3,111 5,753 85%
PC Mall 234,119 262,958 12% 395 2,999 659%
Systemax 547,242 647,102 18% 7,106 13,762 94%
Tessco Technologies 111,940 124,430 11% 1,853 866 -53%
Transcat 15,519 16,190 4% 116 238 105%
Wayside Technology 41,438 44,040 6% 781 959 23%
Zones 145,210 192,232 32% 2,917 4,409 51%
Notes: NM = not meaningful
Source: Tully & Holland

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