Tech Data Reports Lackluster Earnings

The culprit slowing the company? Overseas operations. Although the year-over-year North American net sales growth of 4 percent was shy of last year’s 10.3 percent, sales in Europe, the Middle East and Africa (EMEA) were essentially flat in local currency, with a 0.1 percent drop. A strong U.S. currency pushed the drop to an effective 7.5 percent.

The EMEA results “relate to the disruption we experienced in connection with some experiences last year,” said Tech Data chairman and CEO Steve Raymund, referring to the company's efforts to digest a large acquisition while finishing the conversion of its financial and operational systems to SAP.

In addition, Raymund said he sees significant pressure on margins in EMEA, though he hopes things are about to change.

“It feels like we’re beginning to see some stabilization, and we’ve factored that into our outlook for the quarter and our high-level forecast for the rest of the year,” he said.

That pressure could partly be seen in Tech Data’s gross profit--4.8 percent as a percentage of sales vs. 5.22 percent year-over-year. However, Raymund said the company's underlying finances are stronger than ever before, “despite having repurchased $150 million in stock.”

Raymund said he expects profits to improve as the company continues to broaden its product line and expand services to VARs. Some key growth areas include voice over IP, premise security, professional A/V, data capture and digital imaging.

“Those are some examples of additions that are generating nice growth for us, and were established specifically to support the requirements of VARs in those areas,” Raymund said.