For the business-to-business and computer merchants tracked by Multichannel Merchant, 2007 is off to a good start: The majority turned in stellar performances during the first three months of the year.
Of the dozen companies tracked, all but one b-to-b marketer boosted sales; most had increases in the double-digit range. And all but two of those companies improved their year-over-year bottom lines.
All of the computer merchants posted gains in both sales and profits. “It was a strong quarter for b-to-b merchants and computer products companies, with a majority of firms showing growth in revenues and net income,” says Stuart Rose, managing director of Wellesley, MA-based investment bank Tully & Holland, which tracks public companies for Multichannel Merchant. “As the economy continues to grow, businesses are piling on the earnings. This may eventually lead to higher interest rates, which will dampen growth and valuations. People are beginning to wonder how long this bull market can last.”
Profits slip at Transcat
Quarter ended: March 31 The facts: The manufacturer/marketer of testing, measurement, and calibration equipment’s revenue jumped 17%, to $18.9 million. Net sales for distribution products rose 20%, to $12.7 million compared to $10.5 million after the fourth quarter of fiscal 2006. Net sales for calibration services increased 11.2%, to $6.2 million up from $5.6 million. But the company sustained an 82% decline in its bottom line, dropping to $489,000 from $2.76 million a year ago. The skinny: Transcat’s significant drop in net income is deceiving, since the company lacked a significant tax benefit this quarter, which helped boost earnings in the same quarter of 2006.
Bottoms up for PC Connection
Quarter ended: March 31 The facts: Third-quarter sales for the computer reseller rose 4.7% to $398.2 million, up from $380.5 million for the same period in 2006. For the three-month period, net income doubled to $3.4 million, from $1.7 million last year, and its gross profit increased by $3.5 million compared to the corresponding quarter in 2006. In a statement announcing third-quarter financial results, PC Connection chairman/CEO Patricia Gallup credited part of the company’s growth to strength in the small- and medium-sized business (SMB) segment. The skinny: PC Connection’s healthy balance sheet, coupled with an investment in infrastructure, keyed the quarter’s impressive performance for both operations and shareholder value, Rose says.
Wayside Technology on a tear
Quarter ended: March 31 The facts: First-quarter sales at computer reseller Wayside Technology Group, formerly known as Programmer’s Paradise, jumped 33%, to $46.9 million, compared with $35.4 million for the first quarter of 2006. Net income rose 68%, to $990 million from $591 million. Total sales for the Programmer’s Paradise segment — a reseller for software developers — fell 12%, to $10.8 million from $12.3 million. Sales in the Lifeboat segment — the company’s international wholesale division, which focuses on building partnerships with software publishing companies — soared 56%, to $36.1 million, compared to $23.1 million in the first quarter of 2006. What gives?
The company blamed the sales decline in Programmer’s Paradise to a “renewed focus on technical software,” and attributed the sales increase for Lifeboat to its expanding virtual infrastructure-centric business, the addition of several key product lines, and strengthening of account penetration. The skinny: The three-month period marked the company’s 15th consecutive quarter of double-digit growth. With net income growing at twice the rate of sales, Wayside continues to increase market share, Rose says. Gross profit and net working capital increased year to year while gross margin was down.
| Company | 1Q REVENUE | 1Q NET INCOME (LOSS) | ||||
|---|---|---|---|---|---|---|
| 12 months prior | Current quarter | Increase (decrease) | 12 months prior | Current quarter | Increase (decrease) | |
| (000) | (000) | |||||
| CDW Corp. | 1,588,629 | 1,859,118 | 17% | 61,678 | 76,780 | 24% |
| Collegiate Pacific | 59,418 | 63,235 | 6% | 1,232 | 1,738 | 41% |
| Deluxe Corp. | 411,400 | 403,800 | -2% | 24,700 | 35,200 | 43% |
| Henry Schein | 1,161,781 | 1,334,143 | 15% | 16,259 | 43,494 | 168% |
| MSC Industrial Direct Co. | 305,927 | 404,618 | 32% | 33,329 | 40,507 | 22% |
| PC Connection | 380,478 | 398,180 | 5% | 1,706 | 3,385 | 98% |
| PC Mall | 234,222 | 256,780 | 10% | (55) | 1,868 | NM |
| Systemax | 574,908 | 676,122 | 18% | 17,557 | 13,895 | -21% |
| Tessco Technologies | 96,561 | 127,015 | 32% | 1,058 | 1,568 | 48% |
| Transcat | 16,054 | 18,853 | 17% | 2,765 | 489 | -82% |
| Wayside Technology | 35,362 | 46,922 | 33% | 591 | 990 | 68% |
| Zones | 133,998 | 148,182 | 11% | 1,705 | 2,312 | 36% |
| Notes: NM = not meaningful Source: Tully & Holland | ||||||