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Surging dollar value brightens Tech Data’s European revenues

Overall sales down 12 per cent on year, but better than estimates

Graph of US dollar going up CC 2.0 https://www.flickr.com/photos/68751915@N05/ 401kcalculator.org.

The unfavourable forex rate leaving US vendors with a damp patch on their financial results in Europe ironically might have helped Tech Data in its opening quarter of fiscal 2016.

The world’s second largest tech distie reported sales of $5.8bn for Q1 ended 30 April, down 12 per cent year-on-year, but better than Wall Street estimates, causing a small spike in the share price.

Turnover in the Americas fell six per cent to $2.3bn as the impact of exiting Chile, Peru and Uruguay, as well as local currency challenges, were felt.

PC, tablet and software sales decreased, partially offset by networking, storage and security and consumer electronics.

Across the Atlantic, revenues in Europe decreased 17 per cent to $3.5bn, although in euros the business actually went up five per cent

CEO Bob Dutkowsky said “better than expected IT demand” played a part as did “efforts to realign and reallocate resources to higher growth, more profitable business”. The company said it walked away from some empty margin deals.

Each country in the region grew, with notebooks, peripherals and data centre kit the hot spots. The boss man said pent up demand “that existed from the doom period” was evident.

The euro has devalued 20 per cent against the US Dollar since last summer and with local price rises pending, customers may have used the uncertainty to bring forward their spending plans.

“European demand was stronger and some of that was this pull ahead phenomenon,” said the CEO, “but we don’t think that it’s by any stretch of the imagination a majority of the [sales] achievement”.

Operating expenses shrank by a little less than $100m to $209.9m helped by a LCD settlement benefit of $38.5m and falling S,G&A costs. This left operating income at $81.9m, versus $31.5m in the prior-year quarter.

After interest expense and tax, the net profit was $51.3m compared with $13.5m in Q1 of fiscal 2014 when Tech Data was struck by a series of costs related to its embarrassing accounting probe and restatement.

In guidance for Q2, Tech Data expects a low to mid-single digit year-over-year sales decline in the Americas and mid-single digit sales growth in Europe in constant currency. It made no reference to the estimated impact of the price rises.

The distributor this the week confirmed its intent to acquire North American services firm SATG, and Dutkowsky referred to it as a “partner led” organisation which some of its distie competitors were also using.

“The percentage of business that’s done with our competitors is relatively small, but we did see it in some cases and in fact there was even a case where we lost a bid to one of our competitors because they use STG services through their partner to win,” he said. ®

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