Tech Data's Q1 Bright Spots Are Health Care, SMB

Health-care and SMB sales were bright spots and helped the company to more profitable sales, despite the overall decline in revenue, said Tech Data CEO Bob Dutkowsky.

The Clearwater, Fla., distributor said the weakening of foreign currencies against the dollar impacted sales, as did a reclassification of vendor warranty services and certain fulfillment contracts to be reflected on an agency basis as opposed to net sales and cost of products sold. Under the old way of reporting, Tech Data would have added approximately $200 million in sales.

Tech Data reported $5.90 billion in sales, compared to $6.33 billion in the year-ago quarter. The company earned $51.7 million, or $1.24 per diluted share, compared to net income of $48.7 million, or $1.03 per diluted share, in the year-ago quarter. Tech Data's earnings per share increased 20 percent because of stock repurchases since last year.

Analysts had predicted earnings of $1.16 per share for the first quarter on sales of $6.18 billion.

The year-ago results also include about $100 million in sales from Brazil and Colombia, which Tech Data exited at the end of fiscal 2012. Excluding the impact of those factors, Tech Data's sales would have increased about 1 percent, according to Dutkowsky.

In the U.S., the health-care and SMB markets were particularly strong, accounting for double-digit percentage growth, he said.

"The sales that serve government also grew as tech spending at the state level resumed," Dutkowsky said in a conference call with analysts. "From a product perspective, storage, virtualization, tablets and digital signage were [strong]."

In addition, more than 300 solution providers are now utilizing TDMobility, a platform that includes mobile hardware, software, activations and billing across multiple carriers, Dutkowsky said.

Servers was a weaker area, he said. "That market took a bit of a pause and was less than what we anticipated. The peripherals category slowed down as well, as it would in any time where the economy or segment was under duress. Printers and consumables were lower than what they have been in the past," he said.

Sales in the Americas were $2.5 billion, down 6 percent year-over-year, while revenue from Europe declined 7 percent to $3.4 billion.

For the second fiscal quarter, Tech Data did not offer specific financial guidance but said it expects "relatively consistent sales on a sequential basis" and a decline year-over-year again attributable to a change in presentation of vendor warranty services and fulfillment contracts and the exit of Brazil and Colombia.

For the current quarter, analysts expect earnings of $1.17 per share on sales of $6.20 billion.

Tech Data shares were trading at $49.08 Monday morning, up $1.62, or 3.4 percent.