B-to-B mailers start strong

Jul 01, 2008 9:30 PM  By

The business-to-business and computer merchants tracked by Multichannel Merchant got off to a good start this year: The majority turned in stellar performances during the first three months of 2008.

Of the dozen companies tracked, all but three marketers boosted sales. And except for two companies, all improved their year-over-year bottom lines.

Most merchants saw significant growth in net income. The exceptions were Deluxe Corp., which cited weakness in its small business services operations, and Wayside Technology, which attributed its gloomy quarter in part to reduced sales for its largest vendor.

“Noticeable trends included reduced direct consumer and small business sales, while sales to large businesses and institutions exhibited strong growth,” says Stuart Rose, managing director of investment bank Tully & Holland, which tracks public companies for Multichannel Merchant.

Rose says companies with significant international exposure, such as medical products distributor Henry Schein, capitalized on a weak dollar, which boosted sales growth overseas. “Expense reduction strategies allowed for significant increases in net income, even for companies with only marginal revenue growth,” he says. “For example, Black Box Corp. which posted decreased revenue year over year, had substantial net income growth attributable to cost cutting strategies.”

Supply Group Sports Big Numbers

Quarter ended: March 31 The facts: Sport Supply Group ended its quarter with a record performance. Revenue for the sports equipment merchant rose 4%, to nearly $66 million. But the big news was the bottom line: Net income doubled from $1.7 million the year before to nearly $3.4 million — an increase of 94%. “The substantial increase in profitability was largely attributable to increases in operating margins,” Rose says. This was achieved through increased sales “and a shift toward a more profitable product mix facilitated by the company’s road sales professionals.” Sport Supply also realized substantial savings by reducing selling, general, and administrative expenses by nearly $671,000. Additional contributions included improvements in manufacturing efficiencies and an increase in freight collected. The skinny: The company has grown its cash position and established a strong balance sheet, Rose says. This will provide flexibility to grow and enhance its platform both internally and/or through acquisition opportunities.

PC Mall Stands Tall

Quarter ended: March 31 The facts: First-quarter sales for computer reseller PC Mall jumped 31%, to $337 million, up from $257 million. Revenue numbers were up, Rose says, due to the $66.7 million increase in net sales by the MME segment, which sells complex products and services through a face-to-face selling model. Sales to the public sector increased 38% and sales to consumers increased a surprising 18%. PC Mall grew sales significantly across most divisions, with the exception of a 5% decrease in its small and medium business sales. What’s more, net income rose a staggering 60%, to $3 million, up from $1.9 million. The skinny: With more than 40% of PC Mall’s business dependent on the sales of Apple, Apple-related products, and HP products, the outlook for PC Mall remains positive with Apple and HP products showing strong sales for their most recent quarters, Rose says.

Tough time for Wayside

Quarter ended: March 31 The facts: First-quarter sales at computer reseller Wayside Technology Group, formerly known as Programmer’s Paradise, decreased 14%, to $41 million, down from $47 million one year ago. What’s more, net income sank 36%, to $629,000, from $990,000 last year. The Programmer’s Paradise operating segment reported an increase in sales of 3%, or $400,000. But the Lifeboat segment posted a decrease of $6.8 million, or 19%. VMware, Wayside’s largest vendor, opened up distribution for a number of competitors in 2007, resulting in decreased margins and contributing to the decline in both revenue and net income, Rose says. The skinny: The company says it’s had success in adding new publishers, and has begun transitioning to become a more diverse software provider to decrease its dependence on any single vendor or set of consumers, Rose says.

Company REVENUE NET INCOME (LOSS)
12 months prior Current quarter Increase (decrease) 12 months prior Current quarter Increase (decrease)
($000) ($000)
Black Box Corp. 249,784 245,497 (2%) 6,628 8,394 27%
Deluxe Corp. 403,800 381,200 (6%) 35,200 27,300 (22%)
Henry Schein 1,310,128 1,525,619 16% 43,494 52,330 20%
MSC Industrial 404,618 436,486 8% 40,507 47,460 17%
PC Connection 398,180 423,724 6% 3,385 4,774 41%
PC Mall 256,780 336,627 31% 1,868 2,996 60%
Sport Supply Group 63,235 65,821 4% 1,738 3,376 94%
Systemax 676,122 724,737 7% 13,895 18,061 30%
Tessco Technologies 127,015 128,288 1% 1,568 1,702 9%
Transcat 18,853 19,198 2% 489 723 48%
Wayside Technology 46,922 40,506 (14%) 990 629 (36%)
Zones 148,182 166,757 13% 2,312 2,579 12%
Source: Tully & Holland