Coming Strong Out of the Gate

Most of the publicly traded business-to-business and computer marketers tracked by investment bank Tully & Holland for Catalog Age posted robust revenue and earnings increases during the first three months of the year. Of the 11 catalogers tracked, only Black Box Corp. saw first-quarter revenue decline from last year. (And that 4% dip in sales didn’t prevent the networking equipment cataloger from increasing its bottom line 173%). In comparison, last year less than two-thirds of the catalogers tracked could boast of increased first-quarter revenue.

What’s more, all of the catalogers ended the quarter in the black. Only four of the companies, or 36%, suffered a decline in income — the same percentage as last year. For two of those mailers, PC Connection and New England Business Service (NEBS), one-time restructuring charges were responsible for the cut in profits. Without the one-time charges, both companies would have reported profits.


CDW Continues to Shine

Quarter ended: March 31

The facts: Vernon Hills, IL-based computer reseller CDW continues to boast of double-digit growth on both sides of the ledger. First-quarter sales at CDW increased 31%, to nearly $1.34 billion from $1.02 billion last year. Net income jumped 30%, to $55.3 million from $42.4 million. The first quarter of 2004 included sales from former members of the Micro Warehouse sales force who joined CDW this past September, when CDW acquired the North American assets of its one-time rival.

The skinny: Direct Web sales — those completed without the assistance of a customer service rep — ballooned 56%, to $361.8 million from $232.1 million a year ago.

Big Gains for Programmer’s Paradise

Quarter ended: March 31

The facts: Shrewsbury, NJ-based Programmer’s Paradise credited “a favorable IT spending environment,” along with the hiring of additional account executives, for its strong first quarter. The cataloger of software and accessories for computer professionals saw revenue increase 36%, to $20.7 million from $15.2 million. Even more impressive was the leap in net income: 783%, to $362,000 from $41,000 last year.

The skinny: Selling, general, and administrative (SG&A) costs increased slightly, to $2.2 million from $2.0 million the previous first quarter, due in part to $100,000 in consulting fees relating to information technology upgrades. And Programmer’s warns that going forward its SG&A costs may increase still more due to legal requirements — including complying with the Sarbanes-Oxley Act of 2002, which puts increased responsibilities and penalities on publicly traded companies that fail to accurately disclose financial information.

Special Charges Hurt PC Connection

Quarter ended: March 31

The facts: Merrimack, NH-based PC Connection grew its first-quarter revenue 16%, but one-time charges eroded net income. Net sales were $327.6 million, compared with $283.5 million last year. Net income on a generally accepted accounting principles (GAAP) basis was $1.2 million, down 26% from $1.6 million the previous first quarter.

According to chief financial officer Mark Gavin, an internal review of PC Connection’s GovConnection GSA contract cancellation accounted for $272,000 in after-tax charges. Another charge, for $340,000, resulted from a work force reduction. Excluding those charges, pro forma net income would have been $1.8 million.

The skinny: PC Connection cut its first-quarter circulation 7%, mailing 6.1 million catalogs — but it nonetheless received 2% more orders.

New and “Improved” Customers Boost MSC

Quarter ended: Feb. 28

The facts: Melville, NY-based maintenance, repair, and operations (MRO) supplies marketer MSC Industrial posted a 10% increase in net sales, to $230.5 million from $209.6 million for the first quarter of 2003. Net income grew even more — 45%, to $18.5 million from last year’s $12.8 million.

MSC credits much of that growth to both new customers and larger orders from existing clients. Sales to the nonmanufacturing sector increased 12% for the quarter, while sales to the manufacturing sector rose 9%.

The skinny: MSC says that its e-commerce programs, which allow metalworking customers to browse Web-only offers, get deals on closeout items, and learn about manufacturer rebates on best-sellers, showed growth in the quarter.

Zones Posts Profit

Quarter ended: March 31

The facts: Auburn, WA-based computer reseller Zones reported a first-quarter profit of $791,000, a nice turnaround from the net loss of $646,000 it posted a year ago. First-quarter sales grew 16%, to $114.1 million from $98.6 million last year. Consolidated outbound sales — which include sales to small and midsize businesses, large customer accounts, and public sector markets — increased 18%, to $101.9 million from $86.4 million. Direct Web orders jumped 38%, to $11.5 million.

The skinny: Outbound sales from the company’s 234 account executives accounted for 89% of sales. Unassisted Web sales and inbound calls accounted for the remaining 11%.

Glad Tidings for Tessco

Quarter ended: March 28

The facts: Wireless products marketer Tessco Technologies is getting back on its feet after three years of softness in its market. First-quarter revenue at the Hunt Valley, MD-based company — which in October 2002 had its central sales, support, phone, and data center destroyed by a water main break — increased 55%, to a record $107.6 million. Direct sales grew 148%, while revenue within the commercial/government market increased 17%. Sales of network infrastructure products increased 18%, and sales of mobile devices and accessories grew 10%; sales of installation, test, and maintenance products, however, declined 17%.

The skinny: Tessco in June unveiled a refurbished Website, complete with a speedier product search capability.


12 months prior Current quarter Improvement (decline) 12 months prior Current quarter Improvement (decline) Info as of quarter ended P/E (as of 5/22/04)
Black Box Corp. $134,812 $129,730 (4%) $4,208 $11,503 173% 3/31/04 17.33
CDW Computer Centers 1,017,619 1,336,689 31% 42,406 55,293 30% 3/31/04 29.94
Henry Schein 737,997 886,631 20% 24,766 28,393 15% 3/27/04 20.49
MSC Industrial 209,633 230,537 10% 12,752 18,542 45% 2/28/04 31.58
New England Business Service 127,267 173,488 36% 5,886 2,384 (59%) 3/27/04 49.21
PC Connection 283,527 327,635 16% 1,575 1,158 (26%) 3/31/04 36.26
PC Mall 234,797 278,123 18% 292 136 (53%) 3/31/04 0.00
Programmer’s Paradise 15,198 20,679 36% 41 362 783% 3/31/04 29.25
Systemax 426,461 485,736 14% 5,035 2,412 (52%) 3/31/04 76.71
Tessco Technologies 69,392 107,623 55% 435 1,459 235% 3/28/04 26.00
Zones 98,632 114,092 16% (646) 791 NM 3/31/04 12.86
Dow Jones Industrial Average 18.66
Standard & Poor’s 500 Index 22.44
Notes: Price-to-earnings ratios are from various sources
NM = not meaningful NA = not available
Source: Tully & Holland

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