Following an encouraging first quarter, the publicly traded business marketers tracked by Catalog Age are seeing further evidence of the long-awaited economic recovery.
With the exception of Lawrence, PA-based networking products and services provider Black Box Corp., whose revenue fell 3%, the 12 companies showed year-over-year second-quarter sales gains. Last year 10 of the 14 companies tracked, or 71%, had enjoyed second-quarter revenue increases. Just as important, this year’s revenue gains trickled down to the bottom line, with three-quarters of those tracked posting increased profits. In comparison, last year 67% of the marketers showed bottom-line improvement.
The glad tidings, says Jim Adams, managing director of Wellesley, MA-based investment bank Tully & Holland, are a result of corporations finally investing in information technology products and other capital expenditures, after holding back on such spending for nearly three years. In turn, catalogers are likely upping circulations, he adds.
CATALOG AGE’S SPOTLIGHT ON SECOND-QUARTER FINANCIALS
Tiger Direct Web Sales Fuel Systemax
Quarter ended: June 30
The facts: Port Washington, NY-based Systemax, a manufacturer/marketer of PCs and warehouse and office supplies, shook off nearly $1 million in restructuring charges and still posted a profit. Net sales increased 11%, to $431.0 million from $388.8 million last year. North American sales increased 14%, fueled by strong Internet sales at its Tiger Direct subsidiary. European sales increased 5% in U.S. dollars — though in local currencies they were generally lower than year-ago levels. On the other side of the ledger, Systemax netted $671,000, reversing last year’s second-quarter loss of $1.9 million.
The skinny: Systemax reached profitability in part by saving more than $2.5 million from layoffs and reductions in catalog spending. The company reduced expenses from 15.9% of sales in the second quarter last year to 14.9% this year.
Deluxe Revenue Up on NEBS Purchase
Quarter ended: June 30
The facts: St. Paul, MN-based Deluxe Corp. is the newest entrant onto the Catalog Age chart by virtue of its $643 million acquisition of Groton, MA-based New England Business Service (NEBS) on June 25. In its second-quarter financial release, Deluxe included NEBS’ results for the last five days of the quarter — $7.7 million. That relatively small sum was enough to enable Deluxe to post a slight — less than 1% — increase in second-quarter sales. Deluxe revenue totaled $483.9 million, compared with $483.0 million last year. Deluxe has not yet decided how it will incorporate NEBS in its business; for now, the company will monitor NEBS as a separate segment.
The skinny: At the end of the quarter, Deluxe had $19.8 million in cash — generally in bank accounts, currency on-hand, and short-term, highly liquid securities with a maturity under 90 days, such as U.S. treasury bills. In the year-ago quarter, Deluxe had $7.0 million in cash.
Transcat Takes Measure of Calibration Customers
Quarter ended: June 26
The facts: In the statement that accompanied Transcat’s second-quarter financials, president/CEO Carl Sassano pointed out that customers have resumed previously delayed equipment acquisition and purchasing programs. The Rochester, NY-based manufacturer/ marketer’s double-digit rise in product sales supports Sassano’s statement. But a decrease in service revenue resulted in what the provider of test, measurement, and calibration products and services termed a disappointing quarter. Total second-quarter revenue increased 5%, to $13.2 million. But it reported a loss of $427,000 for the quarter, compared with a net income of $175,000 last year.
To go after the more profitable calibration segment of its audience, Transcat added 25 pages of calibration merchandise to its master catalog. Transcat intends to step up its prospecting efforts and expand into additional markets, such as the federal government.
The skinny: Transcat launched a 50-page prospecting catalog earlier this year, targeting calibration product and services buyers. Response has exceeded expectations.
Increased IT Spending Heavenly News for Programmer’s Paradise
Quarter ended: June 30
The facts: Driven by a favorable IT climate, Shrewsbury, NJ-based software cataloger Programmer’s Paradise posted solid gains on both sides of the ledger. Revenue increased 56%, to $25.1 million from $16.1 million last year. Net income soared 158%, to $523,000 from $203,000. To capitalize on the increase in IT spending, the company, which specializes in software for software developers, increased its sales staff 47% this year.
The skinny: Programmer’s mails 24 editions of its 60-page catalog, even though its tech-savvy audience tends to order online, says CEO Bill Willett. “What we’re finding is that they’ll read the catalog, then go on to the Web and place their order,” he says.
Increased Cost of Goods Hurts PC Mall
Quarter ended: June 30
The facts: On the surface, Torrance, CA-based PC Mall’s 24% increase in second-quarter net sales would seem to be great news. Revenue was $270.5 million, compared with $218.9 million a year ago. But the computer reseller’s costs of goods rose even more — 25% — which ate into its profits. Net income fell 25%, to $707,000 from $947,000 last year.
Breaking revenue down by segment, PC Mall says that corporate sales for the quarter grew 42%. Sales from its Ecost.com auction site climbed 62%, and government unit PC Mall Gov saw a 21% rise in revenue. Sales from the core business catalog fell 15%.
The skinny: PC Mall’s accounts receivable increased 20% from the second quarter of 2003.
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| 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 8/13/04) |
||||||||||
| Black Box Corp | $128,347 | $124,355 | (3%) | $11,496 | $10,003 | (13%) | 7/3/04 | 13.85 | |||||||||
| CDW | 1,075,296 | 1,382,904 | 29% | 43,622 | 58,275 | 34% | 6/30/04 | 24.43 | |||||||||
| Deluxe Corp. | 483,015 | 483,875 | 0 | 31,510 | 46,424 | 47% | 6/30/04 | 11.55 | |||||||||
| Henry Schein | 776,166 | 945,690 | 22% | 32,855 | 38,736 | 18% | 6/26/04 | 18.47 | |||||||||
| MSC Industrial | 215,571 | 255,297 | 18% | 13,168 | 23,873 | 81% | 5/29/04 | 27.24 | |||||||||
| PC Connection | 321,568 | 335,335 | 4% | 1,403 | 2,256 | 61% | 6/30/04 | 26.12 | |||||||||
| PC Mall | 218,862 | 270,496 | 24% | 947 | 707 | (25%) | 6/30/04 | 53.45 | |||||||||
| Programmer’s Paradise | 16,051 | 25,093 | 56% | 203 | 523 | 158% | 6/30/04 | 21.15 | |||||||||
| Systemax | 388,798 | 430,990 | 11% | (1,864) | 671 | NM | 6/30/04 | 38.14 | |||||||||
| Tessco Technologies | 69,991 | 110,605 | 58% | (313) | 1,443 | NM | 6/27/04 | 11.40 | |||||||||
| Transcat | 12,595 | 13,222 | 5% | 175 | (427) | NM | 6/26/04 | N/A | |||||||||
| Zones | 119,106 | 124,023 | 4% | (125) | 1,151 | NM | 6/30/04 | 9.67 | |||||||||
| Dow Jones Industrial Average | 17.19 | ||||||||||||||||
| Standard & Poor’s 500 Index | 20.48 | ||||||||||||||||
| Notes: Price-to-earnings ratios are from various sources NM = not meaningful NA = not available |
Source: Tully & Holland | ||||||||||||||||