CDW revenue increases but pound blamed for UK sales decline

Sales in the UK dropped for the second consecutive quarter

Global reseller monster CDW has reported an increase in net revenue for its third quarter, but UK sales slowed as Brexit and the weak pound continue to take their toll.

Overall sales for the three months ending 30 September were up 5.9 per cent annually to $3.7bn, but net income was down 16.6 per cent to £125.9m in the same period.

In the UK sales dropped 5.3 per cent to $197m, marking a second consecutive quarter of decline revenue for CDW UK (revenue in Q2 dropped 10.3 per cent to $208m). That was due solely to the weakening pound, however, with growth in local currencies in the "mid single digits".

On an earnings call, a transcript of which can be found here, CDW chief executive Thomas Richards said he expects to see further impacts from Brexit and the struggling pound in Q4, adding that triggering Article 50 next year will "certainly change some things".

"It was a little strange right after Brexit," he said. "There was this kind of doom and gloom and then, after a couple of weeks, we actually saw the UK customers return to a sense of, 'OK, [we'll go back to] normalcy and we'll deal with it when we actually execute the withdrawal from the EU'.

"There is this notion that if Theresa May she sticks to the dates she has announced, that will certainly change some things.

"Up until that time, it feels pretty normal and people are just going about their business, making decisions on investing in IT, but I think all of us have our eye on next spring."

CDW reported a slight decline in corporate net sales, dropping 0.9 per cent annually to $1.7bn. Sales in the public sector fared better, up 10 per cent on Q3 last year to $1.6bn.

Richards explained that CDW is used to seeing a swing between profit and loss in the two sectors.

"Given the different macroeconomic and external factors that affect each of these unique customer end markets, our channels often act in a counter-cyclical way," he said on the earnings call.

"For example, in last year's third quarter, public was flat while corporate increased six per cent. This year, the opposite occurred, with public up 10.6 per cent and corporate down just under one per cent. For corporate, small business was up four per cent and medium/large was down just under two per cent."

"While we saw some highlights and glimmers of positive shoots in corporate, the economy indeed was the wild card I mentioned it might be on last quarter's conference call and continued to impact buying behaviour."