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Systemax Q2 Losses Widen

Port Washington, N.Y. – IT reseller Systemax reported a $6.1 million loss in its second quarter, compared to a $2.3 million loss for the year-ago period.

Net sales for the three months ended June 30 declined 5 percent to $805.8 million; consumer sales, which represent 34.5 percent of the mix, fell 15.3 percent to $278.2 million; and consumer comp sales decreased 15.5 percent.

Broken out by product category, CE sales fell 20.2 percent, sales of computer components fell 8.7 percent, sales of computer accessories and software fell 8.3 percent, and sales of computers were essentially flat.

Chairman/CEO Richard Leeds described the results, particularly from the company’s European operations, as “disappointing,” but pointed to “continued strong, profitable growth” within the B-to-B channel and a significant reduction in adjusted operating loss for the North American retail business.

Within the latter, Systemax recently closed three retail stores, including two in July, and plans to shut a fourth location this month in Chicago, which will leave 36 stores. Costs for the closings totaled $1.5 million for the quarter. The company is also opening a new distribution center in New Jersey, has launched a new mobile website, and is accepting bids for its Circuit City and CompUSA intellectual properties through Aug. 15.

“We clearly have more work to do to strengthen our overall performance and return to profitability, which is our primary focus,” Leeds said. “The proactive steps we have taken to strengthen our competitive position, drive operating efficiencies and reduce costs are ongoing.  We are pursuing our growth strategy which includes a number of opportunities in our B-to-B businesses.  With a strong balance sheet and cash of $138 million, we remain well positioned to continue to execute on our strategic plan and drive our operating performance.”

In a research note, Janney Montgomery Scott retail analyst David Strasser noted that the company’s double-digit CE declines “continue to be a challenge” and are unlikely to change in the back-half of the year. But despite topline pressure from CE, greater private label sales, a more margin-rich sales mix, and increased efficiencies from the new distribution center should buoy gross margin for the balance of 2013, he predicted.