Distributors report declining sales in past quarter as COVID-19 shifts buying patterns
If distribution is a bellwether of industry economic health, the quarterly financial reports of Ingram Micro and ScanSource show the impact the COVID-19 pandemic is having on the tech industry and two-tier channel sales.
The Lowdown: The two distributors reported their most recent quarterly sales and financials yesterday, and both saw declines in gross sales as tech spending on traditional IT products declined and more money shifted to remote-work technologies and services. While Ingram and ScanSource reported decreased year-over-year gross sales, Ingram saw an increase in profits due largely to high-margin work-from-home (WFH) product sales.
The Details: Ingram Micro reported a 9% decrease in gross sales, with global volume falling to $10.5 billion for its second quarter compared to $11.5 billion for the same period in 2019. Ingram’s profits increased 1.5%, buoyed by high-margin WFH products.
ScanSource, whose portfolio is more focused on businesses impacted by the pandemic, saw a steep decline in sales and profits in its fiscal fourth quarter. Overall sales declined 22% to $636.5 million, while profits sunk 23% to $74.1 million — both compared to the same period last year. For the full fiscal-year 2020, ScanSource said its sales declined 6% to $3 billion due largely to the impact of COVID-19 pandemic.
The Impact: While Ingram Micro and ScanSource say they have plans to weather the uncertain economic outlook, both say the pandemic will continue to have a negative impact on their performance through the end of calendar-year 2020.
The Buzz: “While the COVID-19 pandemic had a significant impact on our quarterly financial results, I am proud of how our teams have executed and the value we deliver to our suppliers and customers,” said Mike Baur, chairman and CEO of ScanSource. “We’ve taken the necessary actions to strengthen our balance sheet, improve our cost structure, and continue to drive investments in our higher-margin, VAR cloud platform and agency business.”
“The company has benefited from its broad portfolio of products and solutions as a decrease in demand for certain services and Advanced Solutions offerings during the second quarter, related to the COVID-19 pandemic, was offset by strength in Technology Solutions and e-commerce solutions demand across multiple categories and geographies as businesses and consumers shifted spending patterns in the work-from-home and shelter-in-place environment,” Ingram Micro wrote in a statement. “While profitability has been strong during the first half of fiscal 2020, the shutdown of many businesses around the world could have a negative impact on the company’s financial performance through the remainder of the fiscal year.”