Tech Data: Pricing Pressure Hurts Q2 Earnings


Tech Data shares fell Tuesday morning after the company reported lower-than-expected earnings for its second fiscal quarter ended July 31.

The Clearwater, Fla.-based distributor blamed the disappointing results on competitive pricing in both the Americas and Europe as well as the implementation of some SAP modules in the U.S., said CEO Bob Dutkowsky in a statement.

"We are confident that our post-implementation efforts will return us to improved levels of profitability over the next couple of quarters," he said in the statement.

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Tech Data earned $34.4 million, or 88 cents per diluted share, on $5.96 billion in sales in the second quarter, compared to net income of $50.1 million, or $1.10 per diluted share, on $6.45 billion in sales in the year-ago quarter.

Tech Data shares were trading at $49.55 Tuesday morning, down $2.60, or 5 percent.

Tech Data's sales were impacted by a change in the reporting of vendor warranty services and other fulfillment contracts that are now reflected as net agent fees and not net sales and cost of products sold, according to the company. Under the old reporting system, that would have accounted for $191 million in additional revenue, according to the company.

In addition, Tech Data had $102 million in sales in Brazil and Columbia in the year-ago quarter but has since exited the business in those countries.

Sales in the Americas were $2.40 billion in the second quarter, down 11 percent compared to the year-ago quarter. Sales in Europe fell 5 percent.

For the current quarter, Tech Data expects a mid-single-digit percentage sales growth, in Euros, in Europe and a mid-single-digit decline in sales for the Americas. The year-over-year comparisons will be further impacted by the change in reporting of vendor warranty services and contracts as well as the cessation of operations in Brazil and Columbia at the end of fiscal 2012, according to Tech Data.

Prior to Tech Data's financials Tuesday, analysts had been predicting earnings of $1.17 per share on sales of $5.83 billion for the July-end quarter.

For the current quarter, analysts expect earnings of $1.37 per share on sales of $6.09 billion.

PUBLISHED AUG. 21, 2012