With a few exceptions, 3Q ’99 looks just like 3Q ’98
Of the 12 publicly traded business-to-business catalogers tracked by Boston-based investment bank Ulin & Holland for Catalog Age, 10, or 83%, posted third-quarter sales increases – the same percentage as last year. But the computer catalogers as a whole faced a bit of a slump. Last year every one of them enjoyed third-quarter sales growth; this year two of the eight catalogers, or 25%, suffered a drop in third-quarter sales.
As for earnings, 33% of the b-to-bers suffered a decline in third-quarter net income, the same percentage as last year. And whereas last year two of the computer mailers saw a drop in third-quarter net income, this time around three of the catalogers saw their net income turned into a net loss.
Among the b-to-b catalogers, Dallas-based Sport Supply Group suffered the most damage to the bottom line. Despite a 20% rise in revenue, from $25.3 million to $30.4 million, its net income plunged 68%, from $1.3 million to $404,000. The company, which sells sports equipment to schools and other institutions, blamed the earnings decline on its implementation of a new information technology system, the timing of which “did not allow us to integrate the acquisitions we made in the time period we would have preferred,” according to a statement.
On the plus side, Melville, NY-based dental and medical supplies cataloger Henry Schein boosted earnings a whopping 400%, from $2.3 million to $11.5 million. CEO Stan Bergman credits the growth to the integration of the 13 companies Schein has acquired since 1998. “Our strategy is based on our infrastructure,” he says. “The more volume we can pump through our infrastructure, the better we can expand our operating margins. Now that we have integrated those acquisitions, we are starting to realize the benefits.” Schein’s sales for the quarter rose more than 17%, from $492.6 million to $578.8 million.
Tessco Technologies’ bottom-line growth wasn’t too shabby either. The Hunt Valley, MD-based cataloger, which sells wireless communication supplies, rode a 181% increase in profits, from $536,000 to $1.5 million, on a revenue increase of just 3%, largely by modifying its purchasing practices and product mix.
Computing difficulties
Among the computer catalogers, PC Connection was the biggest winner. The Merrimack, NH-based mailer recorded sales of $282.1 million during the quarter, a 67% increase over last year. But more impressive was the cataloger’s 91% leap in earnings, to $6 million. “The continued growth of our outbound telemarketing sales force and the June acquisition of ComTeq were the key drivers of our sales and earnings growth,” says chief financial officer Mark Gavin. ComTeq sells servers and peripherals to the U.S. federal government on a contract basis.
But Torrance, CA-based Creative Computers didn’t fare so well this quarter. The cataloger blamed its net loss of $2.5 million on a 12% decline in sales of Apple computers following a delay in the supply of Apple computer chips.
Supply constraints from Apple also hurt Renton, WA-based Multiple Zones, which not only saw revenue tumble nearly 15%, from $124.3 million to $106.4 million, but also lost $3.2 million during the quarter. Apple’s chip travails weren’t the only cause for Multiple Zones’ disappointing performance, however. International sales fell 75%, to $4.5 million from $18.5 million last year, due to the company’s divestiture of its international subsidiaries.