European layoffs on the cards in Systemax restructure
Retail and online giant makes major remodelling moves following poor Q3 numbers
Systemax is dropping two of its brands, exiting the system builder market and moving European jobs east to cut costs, following a downbeat set of quarterly results.
The US titan, which owns Misco in the UK, saw its revenue for the three months to the end of September fall six per cent annually to $846.3m. Operating loss for the quarter stood at $1.9m, compared with a profit of $19.3m in the corresponding period last year.
The sales slowdown was completely attributable to the firm's consumer operations, where revenue declined 19 per cent to $392.6m. B2B sales rose four per cent to $507.6m. In the last 12 months, Systemax's B2B-consumer revenue percentage split has tilted from 56-44 to 62-38.
Issued with today's numbers was an announcement that the reseller "intends to open a shared services centre in eastern Europe in 2013". The facility will provide admin and back-office functions and Systemax hopes it "will help drive operational efficiencies and better serve the company's pan-European operating strategy".
One-off costs, including redundancies, will put a dent of about $15m in the firm's numbers across its next two quarterly results. Annual savings facilitated by the shared services centre are estimated to be in the range of $9m to $11m.
Post-PC world
Also announced today was the decision to exit the PC manufacturing game, at a one-off cost of $6m to $8m. The company believes the move will allow the "strengthening [of] its strategic relationships with vendor partners within the desktop PC category [and] should provide improved profitability of between $1m and $2m" each year.
Meanwhile, Systemax's US consumer brands are to be united under the banner of TigerDirect, its largest operation. The CompUSA and Circuit City monikers are to be retired, at a cost of about $34m, which will show up on the company's Q4 figures.
Chief executive Richard Leeds said: "Our third-quarter results reflect a continuation of the trends we witnessed in the first two quarters of this year. As in the second quarter, we essentially broke even on a consolidated basis if you exclude special charges. Our B2B operations continue to grow nicely, as we notched our 10th straight quarter of 25 per cent or better growth in industrial products, and in our European B2B business we recorded 11 per cent growth on a constant currency basis, despite the challenging regional economic environment.
"As good as these results were, they were unfortunately more than offset by continued weakness in our North American consumer business. The weakness is largely driven by industry trends that include soft demand for PCs and a number of consumer electronics products. We are taking steps to improve our ability to navigate this environment by making significant operational improvements with a focus on driving our long-term top and bottom-line results.
"Our business is supported by a very strong balance sheet with a healthy cash position, providing us with ample liquidity as we execute on our strategic plan," concluded Leeds.