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Systemax breaks through $1bn barrier in Q4 but profits slide

Microscope contributor

Systemax just broke through the $1bn (£621m) sales barrier in calendar Q4 powered by an upturn in B2B spending, but rising costs and integration charges contributed to a 31% slide in profits.

The Misco and WStore parent saw total turnover rise 7% for the period ended 31 December, as the retail division grew 3% to $534m - though it fell 1% on a same store basis - while B2B sales jumped 12% to $472m.

Profits for the period were $12.7m (£7.8m) compared to $18.4m in the same period in 2009, prompting Systemax CEO Richard Leeds to voice disappointment with the earnings.

"Below the revenue line it is clear that gross and operating margins remain under pressure and continue to impact our bottom line performance," he said in a conference call with financial analysts late last night.


The integration of WStore caused one-time charges of $1.1m while selling, general and administrative expenses went up 14%.

It was a tale of two business units in the quarter as returning confidence in the B2B markets translated to improved spending on IT, but the slowdown in the consumer market remained painfully evident.

"While economic indicators and corporate profits signal that the economy is beginning to grow, it is clear that CE consumer confidence has yet to show that they can keep pace," said Leeds.

He expected the market to pick with the arrival of further tablet PCs but admitted there was no doubt that netbook sales had been lost to the slate form factor.

Leeds said to firm up gross margins this year Systemax would discount kit more selectively and had already launched a shipping up-sell programme.

"Overall we are in a good position to drive improved performance in 2011 assuming the economic conditions continue to improver and we execute well.

"Our B2B businesses are strong and poised to benefit from the WStore integration, the continuation of the IT refresh cycle and ongoing product line expansion," he said.
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