Systemax Posts Higher Q1 Sales; Gets Circuit City

By Steve Smith and Alan Wolf -- TWICE, 5/18/2009

Port Washington, N.Y. — Systemax, which operates the TigerDirect and CompUSA retail operations, reported that sales were up but net profits were down for the quarter, and got the winning bid for the rights to the Circuit City brand.

Consolidated net sales grew 4 percent to $752.3 million in the first quarter, ended March 31. North American technology product sales grew 21 percent to $502.4 million. Net income was $8.7 million, down from the prior year’s $18.1 million.

Richard Leeds, chairman/CEO, said in a statement: “Despite the prolonged economic downturn, Systemax has successfully grown market share across our businesses, including TigerDirect, CompUSA and Misco. On a constant currency basis, top line revenue grew 12 percent and, most noteworthy, our North American technology products group revenues grew 24 percent. Our North American operations continue to benefit from the successful addition of the CompUSA business.”

A federal bankruptcy court in Richmond, Va., has approved a $14 million bid by Systemax to acquire Circuit City’s brands, trademarks and e-commerce business last Wednesday. The sale was given the green light by U.S. Bankruptcy Court Judge Kevin R. Huennekens.

Systemax had initially offered Circuit City $6.5 million and a percentage of sales for 30 months. An auction for the properties was held last Monday in New York.

Other bidders reportedly included Ultimate Electronics, the Colorado CE chain owned by investor Mark Wattles. Wattles’ agitation as a major Circuit City shareholder led to a shakeup of the company’s board and management, neither of which could prevent its eventual bankruptcy and liquidation.

Circuit City bankruptcy attorney Gregg Galardi said in court that Ultimate’s bid was not high enough to be considered for the auction, according to a Richmond Times-Dispatch report.

Systemax had said the purchase “would further extend its position as a leader in online retailing of value-priced, branded consumer electronics.” The company previously hired 13-year Circuit City veteran Enas Raynor as a business development VP, citing her experience as territory business manager of Circuit’s The City concept stores.

Systemax similarly acquired the brand, trademarks and e-commerce business of CompUSA in January 2008. That deal, which fetched about $30 million, also included some 16 former CompUSA storefronts.