Business is booming — sort of. Among the 12 publicly traded business-to-business merchants tracked by Catalog Age, all but one posted a rise in third-quarter revenue. That’s 92%, up slightly from 86% a year ago.
But while sales are up, the same can’t be said for profits across the board. Only half of the marketers reported improved bottom lines. “Companies had to spend to boost sales and will look to recover in future periods,” says Jim Adams, managing director of Wellesley, MA-based investment bank Tully & Holland, which tracks the publicly traded companies for Catalog Age. Still, 50% marks an improvement over last year, when only 43% of marketers posted bottom-line gains.
Sales up, earnings down at Tessco
Quarter ended: Sept. 26 The facts: Despite a 41% leap in third-quarter revenue, Hunt Valley, MD-based wireless products merchant Tessco Technologies suffered a 30% tumble in net income. For the third quarter of 2004, Tessco netted $1.6 million on revenue of $115.7 million. For the previous third quarter, it had reported earnings of $2.3 million on sales of $81.9 million. In the year-ago quarter, however, Tessco’s net income had included a $1.9 million after-tax benefit relating to the 2002 flooding of its logistics center. The skinny: After July 31, 2005, wireless service provider T-Mobile USA will stop using Tessco’s e-commerce marketing and sales system. T-Mobile programs accounted for 38% of Tessco’s revenue this quarter but only 19% of its gross profit.
Zones grows its bottom line
Quarter ended: Sept. 30 The facts: Auburn, WA-based computer reseller Zones boosted its bottom line a whopping 946%, to $1.4 million for the quarter, compared with net income of $134,000 for the third quarter of 2003. Net sales grew 15%, to $129.8 million from $112.7 million the previous year. Consolidated outbound sales to businesses and the public sector increased 19%, to $120.3 million. Public sector sales for the third quarter increased nearly 94%. One dim spot: Gross profit margins were down from 11.9% in the third quarter of 2003 to 10.9%. Chief financial officer Ron McFaddden blamed the decline on the public sector markets, which bought lower-margin products such as servers and software. The skinny: Net inventories at Zones increased to $17.4 million as of Sept. 30, up from $11.5 million for the quarter ended Dec. 31, 2003.
Record income for CDW
Quarter ended: Sept. 30 The facts: Vernon Hills, IL-based CDW Corp. enjoyed a 46% jump in net income, to $65.2 million — a record for the computer reseller. Third-quarter sales increased 24%, to $1.51 billion, compared with $1.22 billion in 2003. Direct Web sales — those processed without the assistance of a customer service rep — increased 44%, to $406 million. CDW’s public sector sales, which include federal government sales, increased 20%, to $414.8 million. Corporate sector sales hit nearly $1.10 billion, up 25% from $878.4 million in the third quarter of 2003. The skinny: CDW ended the quarter with $639.8 million in cash and cash equivalents and marketable securities — 21% more than the previous third quarter.
Sales up, profit up more at PC Connection
Quarter ended: Sept. 30 The facts: Third-quarter sales at Merrimack, NH-based PC Connection inched upward 1%, to $351.3 million. But the computer reseller’s net income rose appreciably more — 27%, to $2.8 million. Sales at PC Connection Sales Corp., which targets small and midsize businesses, totaled $195.9 million, a 9% increase from the third quarter of the previous year. Sales at GovConnection, which sells to the federal government, fell 25%, to $77.9 million. MoreDirect, which handles large accounts, totaled $77.5 million in sales, up 17% from the previous third quarter. The skinny: During the quarter, PC Connection mailed 6.9 million catalogs — 17% fewer than the 8.3 million books the company mailed during the third quarter of 2003.
| 3Q REVENUE | 3Q NET INCOME (LOSS) | |||||
|---|---|---|---|---|---|---|
| Company | 12 months prior | Current quarter | Increase (decrease) | 12 months prior | Current quarter | Increase (decrease) |
| (000) | (000) | |||||
| Black Box Corp. | $129,268 | $126,595 | (2%) | $12,051 | $10,623 | (12%) |
| CDW Corp. | 1,222,785 | 1,511,054 | 24% | 44,604 | 65,178 | 46% |
| Deluxe Corp. | 314,900 | 485,000 | 54% | 58,200 | 57,500 | (1%) |
| Henry Schein | 892,718 | 1,033,625 | 16% | 44,347 | 31,504 | (29%) |
| MSC Industrial | 208,767 | 246,687 | 18% | 13,691 | 22,264 | 63% |
| PC Connection | 349,420 | 351,265 | 1% | 2,180 | 2,817 | 29% |
| PC Mall | 231,996 | 283,288 | 22% | 703 | 210 | (70%) |
| Programmer’s Paradise | 18,355 | 26,788 | 46% | 333 | 626 | 88% |
| Systemax | 405,011 | 460,271 | 14% | 1,907 | 2,692 | 41% |
| Tessco Technologies | 81,929 | 115,690 | 41% | 2,289 | 1,604 | (30%) |
| Transcat | 11,896 | 12,488 | 5% | 355 | (93) | NM |
| Zones | 112,697 | 129,829 | 15% | 134 | 1,402 | 946% |
| Notes: Price-to-earnings ratios are from various sources NM = not meaningful Source: Tully & Holland | ||||||