Given how dismal the fourth quarter of 2001 had been, what with the aftermath of 9/11 and the recession, you’d expect that fourth-quarter results for 2002 would show huge improvements. But while as a group the business-to-business marketers tracked by Catalog Age did best their top-line and bottom-line performance from the previous year, the improvement was hardly dramatic.
For the fourth quarter of 2001, 77% of the publicly traded b-to-b catalogers suffered a drop in sales; for the fourth quarter just ended, 45% saw sales decline. And while 54% of the catalogers had posted weaker bottom lines for the fourth quarter of 2001, so did 36% of the catalogers for the fourth quarter of 2002.
Those catalogers that have increased their profits or narrowed their losses generally did so by continuing to cut costs — which often results in modest, if any, sales growth.
“With a few exceptions, there’s been some bottom-line improvement,” says Jim Adams, managing partner of Wellesley, MA-based investment bank Tully & Holland, which tracks the companies for Catalog Age. “The improved bottom lines are a good sign for the computer marketers in particular because they’ve been getting hammered for a while now.”
But even those b-to-b and computer catalogers that enjoyed fourth-quarter upticks shouldn’t assume that happy days are here again. Normally improved income figures would signify future growth, Adams says, “but it’s not yet clear how businesses will spend on products and services during a possible war with Iraq.”
CATALOG AGE’S SPOTLIGHT ON FOURTH-QUARTER FINANCIALS
School Market Heats Up for Sport Supply Group
Quarter ended: Dec. 27
The facts: Dallas-based Sport Supply Group, which sells sports equipment to schools, organizations, and institutions, reported a 9% revenue gain, to $18.5 million from $17.0 million for the fourth quarter of 2001. The company credits recovering government and school sales as well as sales to youth sports leagues for the boost during what is traditionally the weakest quarter for its market. Sport Supply Group also cut its net loss 54%, to $2.4 million, compared with $3.7 million last year.
The skinny: Decreased advertising and catalog mailings saved Sport Supply Group nearly $136,000.
Tough Quarter for Tessco
Quarter ended: Dec. 29
The facts: Hunt Valley, MD-based Tessco Technologies, which sells mobile devices and accessories for Internet and wireless products, suffered a trying fourth quarter. At $65.0 million, revenue was virtually flat with the previous fourth quarter’s. Worse, net income plummeted 77%, to $311,400 from $1.4 million. Gross profit was $16.4 million, down from $18.0 million.
The skinny: Tessco blames much of its disappointing performance to an Oct. 12 water main break that severely damaged the central sales, support, data and phone center in its Hunt Valley global logistics center.
Less Equals More at PC Connection
Quarter ended: Dec. 31
The facts: The computer reseller’s net sales for the three months ended Dec. 31 were $322.2 million, up 18% from $273.6 million for the fourth quarter of 2001. Net income at the Merrimack, NH-based company increased 107%, to $2.9 million from $1.4 million. Even excluding the operations of MoreDirect, which the company acquired in April 2002, net sales grew 38% over a year ago. Other positive attributes from the quarter: a 4% increase in orders and a 7% increase in its average order size, to $1,135.
The skinny: What’s more impressive than PC Connection’s sales growth? That the growth came despite the company’s mailing 19% fewer catalogs (7.6 million) than it had during the fourth quarter of 2001.
CDW Breaks Billion-Dollar Barrier
Quarter ended: Dec. 31
The facts: CDW Computer Centers ended the fourth quarter with record sales. A 7% rise in sales resulted in revenue of more than $1.05 billion for the Vernon Hills, IL, reseller. Direct Web sales increased 33%, to $214.6 million from $161.0 million the previous fourth quarter. Public-sector sales increased 17%, to $208.2 million; corporate-sector sales rose 4%, to $845.8 million. Net income for the quarter rose 9%, to $45.5 million, compared with $41.9 million last year.
The skinny: CDW reported revenue growth for nearly all product categories, with growth rates exceeding 12% for input devices, video, memory, network/communications, and printers.
Good News and More Good News for PC Mall
Quarter ended: Dec. 31
The facts: Torrance, CA-based PC Mall saw impressive improvements on both sides of the ledger. Net sales increased 34%, to $236.3 million from $175.9 million. And net income for the computer reseller soared 145%, to $5.4 million from $2.2 million. Catalog sales increased 9%.
The skinny: The company’s government-sales subsidiary, PC Mall Gov, continues to pay dividends; its revenue increased 15%.
Black Box Takes a Hit
Quarter ended: Dec. 29
The facts: The continuing hesitancy of businesses to make major IT investments has hurt Lawrence, PA-based Black Box Corp. The cataloger of computer networking products and services suffered a 15% drop in sales, to $153.1 million, and a 12% decline in net income, to $14.8 million.
The skinny: Despite the disappointing results, Black Box paid its first-ever quarterly dividend to shareholders.
FINANCIAL REPORT
| REVENUE $000 | NET INCOME (LOSS) $000 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 12 months prior | Current quarter | Improvement (decline) | 12 months prior | Current quarter | Improvement (decline) | Info as of quarter ended | P/E (as of 2/7/03) | ||
| BUSINESS-TO-BUSINESS | MSC Industrial | $188,852 | $210,692 | 12% | $7,932 | $12,481 | 57% | 11/30/02 | 29.68 |
| New England Business Service | 157,532 | 152,599 | (3%) | 9,349 | 12,921 | 38% | 12/28/02 | 8.49 | |
| Sport Supply Group | 17,043 | 18,518 | 9% | (3,695) | (2,358) | NM | 12/27/02 | N/A | |
| Tessco Technologies | 65,025 | 65,010 | 0 | 1,371 | 311 | (77%) | 12/29/02 | 11.03 | |
| Transmation | 16,453 | 14,578 | (11%) | (5,362) | 1,330 | NM | 12/31/02 | 10.53 | |
| COMPUTER PRODUCTS | Black Box Corp. | $179,241 | $153,062 | (15%) | $16,869 | $14,777 | (12%) | 12/29/02 | 14.33 |
| CDW Computer Centers | 988,190 | 1,053,953 | 7% | 41,945 | 45,546 | 9% | 12/31/02 | 20.86 | |
| Insight Enterprises | 529,860 | 771,955 | 46% | 255 | (78,147) | NM | 12/31/02 | N/A | |
| PC Connection | 273,636 | 322,150 | 18% | 1,445 | 2,864 | 98% | 12/31/02 | 47.69 | |
| PC Mall | 175,850 | 236,305 | 34% | 2,177 | 5,373 | 147% | 12/31/02 | 5.97 | |
| Zones | 114,020 | 104,659 | (8%) | (124) | (1,092) | NM | 12/31/02 | N/A | |
| MARKET INDICES | Dow Jones Industrial Average | 20.50 | |||||||
| Standard & Poor’s 500 Index | 28.23 | ||||||||
| Notes: Price-to-earnings ratios are from various sources NM = not meaningful NA = not available |
|||||||||
| Source: Tully & Holland | |||||||||