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Systemax Reports Lower Profit On Record Sales

11/11/2010 09:11:55 AM Eastern
Port Washington, N.Y. - Systemax, a maker and retailer of PCs, peripherals and other CE products, posted a 32 percent decline in net income, to $8.6 million, despite record third-quarter sales.

Net sales rose 14 percent to $862.7 million for the three months, ended Sept. 30, which included a 3 percentage-point boost from favorable exchange rates and the contribution from its French e-tail subsidiary WStore.

Chairman/CEO Richard Leeds attributed the profit shortfall to the still-challenging marketplace, and gross and operating margin pressure from discounted shipping, competitive pricing, limited vendor funding, start-up costs for a new distribution center in Georgia, and one-time charges for the integration of WStore.

"We remain focused on improving our bottom line performance, as we look to control costs and increase the efficiency of our operations," he said.

Leeds said the strong top-line results stemmed from "solid performances" in the company's business-to-business technology and industrial operations, as well as improvement in its consumer channel unit, which includes TigerDirect and CompUSA stores and websites, CircuitCity.com, call centers and TV shopping networks.

 Sales for the consumer segment rose 6 percent to $427.5 million during the quarter, including a 1 percentage-point assist from favorable exchange rates and WStore, while same-store sales increased 4 percent.

"We are encouraged by the initial results of our [TigerDirect and CompUSA] co-branding initiative and have already begun to see increased traffic as a result of this effort," said Gilbert Fiorentino, chief executive of Systemax's technology products group. "Additionally, the opening of our new Georgia facility, which includes a distribution center, call center and retail store, will allow us to further improve our logistical capabilities and will be integral to profitably growing our revenues in the future."

Separately, Systemax entered into an amended and restated credit agreement with a syndicate of leading banks last month. The secured asset credit agreement provides for a five-year revolving credit facility of $125 million, with the opportunity to increase to $200 million, subject to terms and conditions.
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