Tech Data's shares took a 19 per cent dive after it posted its Q4 results on Thursday, with CEO Robert Dutkowsky pointing the finger at some of the firm's key vendors altering their contracts. Here we round up four key takeaways from its Q4 numbers.
1) Wall Street expected better
The distribution giant's non-GAAP operating income rose 77 per cent to $216m (£156m) during the three months ending 31 January. For its FY2018, non-GAAP profits rose by 78 per cent to $602.7m year on year. Non-GAAP margins grew by 31 basis points during the quarter to 1.95 per cent of sales.
However, Tech Data missed analyst targets, according to Thomson Reuters.
As a result, Tech Data had a rocky trading day with shares plunging 20 per cent on 8 March, closing at $86.40, down from $99.39. Shareholders are unlikely to be pleased, as Tech Data's value is now down nearly 10 per cent for the year to date.
2) Vendors programme changes have hurt performance
In a Q4 earnings call transcribed by Seeking Alpha, Dutkowsky said a major pain point in Q4 was several of its vendors changing their partner programmes, resulting in lower margins.
When pressed on the issue, he insisted that vendor recalibration is affecting the rest of the distributor market.
"This is not a Tech Data issue, it's a moment in time where the vendors are adjusting programmes," he said.
"As we look out over the course of the year and we look at the programmes that were announced to us, they happened to touch vendors that we have large percentages of performance with, so they're impacting Tech Data maybe more than they would a distributor that doesn't have a big relationship with a particular vendor."
He suggested that vendors were feeling the pressure of a "rapidly changing" IT market, and passing it further down into the channel.
"You can look at the profitability of many of our primary vendors, because they've reported within the last 30 to 45 days, and you could see many of their profit profiles are under duress."
Dutkowsky added that it will likely continue to affect Tech Data's margins into the next quarter:
"When we model out the impact of the changes we've seen announced so far, you can see that it will have an impact on our Q1 performance," he said.
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