Ingram bemoans tough European retail market

Operational hitches in Oz don't help Q3 numbers either


Ingram Micro profits have tumbled by nearly two-thirds on the back of an ultra aggressive pricing market in Europe and the fall out from the botched ERP upgrade in Oz.

The world's largest distie – which last week warned of the issues impacting results – recorded a 5 per cent year-on-year rise in sales to $8.9bn for calendar Q3 but net profits dived 64 per cent to $23.3m.

Greg Spierkel, chief exec at Ingram, described sales to SMEs as "solid" in Europe but added the macroeconomic issues continue to "weaken consumer sentiment and spending in several geographies and market segments".

"The softer environment spurred competitive pricing behaviour impacting gross margins and profitability. We continue to manage cost diligently though in this environment," he said.

Regionally, North America revenues grew 3 per cent to $3.77bn and operating profit was flat at $64.2m. EMEA sales grew 7 per cent to $2.65bn – including a currency headwind that added nine percentage points – and operating profit fell 14 per cent to $16.2m.

Turnover in Latin America was up 13 per cent to $420m and operating profits went up 77 per cent to $6.2m. In Asia Pacific, revenues went up five per cent to $2.06bn but operating income collapsed from $28.2m a year ago to $7.8m due to the woes Down Under.

Ingram is in market share recovery mode following the ERP system upgrade project, which was beset with issues and inconsistent progress, said Spierkel.

"Competitors in Australia are fighting for share position and we adopted more active marketing and pricing strategies to win our customers back... this has taken the bite out of our margins," he said.

There was no further talk of redundancies in Europe, first mooted last quarter, but Ingram confirmed it is making some cuts backs in Oz.

"Our costs are not aligned with the current sales volumes so we're taking action to streamline the Australian operation, which should improve operating profits within the next couple of quarters," said Spierkel.

Looking ahead, Ingram expects Q4 growth in the high single digits – below seasonality – to due the existing issues in Europe and Oz and was unwilling to make a call about next year but pointed to better conditions in the commercial segments.

Spierkel said Ingram was looking to beef up its enterprise computing portfolio with some new vendors signing, after having made several acquisitions in the space – including of CCD in late 2009. ®

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