1. Business

Tech Data's first-quarter net sales jump 22 percent to $8.5 billion

Published May 31, 2018

CLEARWATER — Stronger than anticipated demand for personal computers, servers and data storage helped drive a 22 percent increase in Tech Data's net sales, to $8.5 billion for the three months ending April 30, beating Wall Street expectations.

"We love it when demand is good," Tech Data chairman and chief executive officer Bob Dutkowsky told the Tampa Bay Times Thursday. "The biggest surprise we saw was the strength of the demand for IT spending in the quarter."

Tech Data buys computer equipment from major suppliers — think Apple, HP and Cisco — then ships it to IT customers through 11 logistics centers worldwide, six of them in the continental United States. During its first quarter this year, 42 percent of its net sales took place in the Americas, 55 percent in Europe and 3 percent in the Asia-Pacific market.

Another big factor boosting sales was favorable foreign currency exchange rates, Back that out, and sales were still up a healthy 13 percent.

"Good job," CFRA Research analyst David Holt wrote in a research note after Tech Data reported its results. He maintained a "hold" recommendation for Tech Data's stock, which was trading above $87 a share at 3 p.m. Thursday, up nearly 6 percent from the close of trading Wednesday.

In a telephone interview, Dutkowsky and his successor, Rich Hume, currently the company's chief operating officer and executive vice president, who takes over as CEO on June 6, said:

• Tech Data is not yet seeing impacts on suppliers or business from talk of increased tariffs, possible trade wars or Brexit. Much of the focus on trade is on Asia, which remains a small part of Tech Data's business.

"For example," Dutkowsky said, "we've chosen not to do business in China, because it's an American-based company dealing with technology, and (with) the Chinese it's just not a good environment to do business in today. We're not in China, and we don't feel bad that we're not in China."

• The federal tax bill passed in December is expected to cut the company's tax rate from its previous range of 30 to 32 percent down to 26 to 28 percent. That will give the company more money to work with, though Hume said it's difficult to say how much. He did expect that any additional revenue realized could be handled in line with Tech Data's normal investment guidelines. That could mean returning some savings to profit, investing some in next-generation technologies like cloud computing, analytics and security, and returning some to shareholders.

• Succession-planning from Dutkowsky to Hume has been under way for more than two years, so Hume will take the top job at a company where he has been closely involved with setting the strategy.

"I remain committed to executing something that I had a big hand in creating," he said.

"When I joined the company 12 years ago, I came from outside, and I had to spend the beginning part of my tenure here figuring out what Tech Data did and how it works and who did what," Dutkowsky said. "Rich has all of that behind him already, so he's in a really good position to take control of the company, put his imprint on it and take it where he needs it to go."

PREVIOUS COVERAGE: Tech Data names Rich Hume to take over as CEO

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Gross profit for the quarter was $523.1 million, an increase of $66 million, or 14 percent, compared to the same quarter in 2017. Non-GAAP earnings per share were $1.84, a decrease of $0.03, or 2 percent, compared to the same quarter a year ago.

For the company's second quarter, which ends July 31, Tech Data said it anticipated more of the same: net sales worldwide of $8.6 billion to $8.9 billion and non-GAAP earnings per share of $1.95 to $2.25.

But the company is poised to make adjustments as conditions require, Dutkowsky said.

"For a Fortune 85 company with $35 billion in sales we're pretty good at pivoting toward where the opportunities are," he said.

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Contact Richard Danielson at or (813) 226-3403. Follow @Danielson_Times