Overall e-commerce sales inched up last year at the distributor of office and industrial supplies to thousands of resellers, but they also fell within some product categories.

Digital commerce is both an advantage and a weak spot for Essendant Inc., a multibillion-dollar distributor of office, automotive, technology and industrial products to thousands of other distributors and resellers.

The company reported a 4.5% year-over-year drop in net sales for the fourth quarter ended Dec. 31, to just over $1 billion, resulting in a net loss for the quarter of $1.55 million. For the year, revenue fell 6.2% to $5.04 billion, and the company posted a net loss of $266.98 million largely because of a “goodwill impairment” accounting charge related to softened demand in the industries it serves.

Ric Phillips,
president and CEO, Essendant

But president and CEO Ric Phillips noted several improvements underway, including a restructuring program expected to cut more than $25 million in costs this year and reach savings of $50 million by 2020. He also cited Essendant’s expertise in digital commerce.

While Essendant’s total net sales fell 6.2% for the year, its e-commerce sales inched up 0.5%, to $755.599 million, accounting for 15% of net sales in 2017, up from 14% the prior year.

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“I want to reiterate the long-term potential I see in this business,” Phillips said on a conference call with stock analysts last week, according to a transcript from Seeking Alpha. “We are a leading national distributor across a variety of product categories, serving a diverse group of reseller customers. We provide access to a broad product portfolio, nationwide delivery and deep sales, marketing and digital expertise.”

Essendant is known for helping many of its 29,000 reseller customers get up and running with their own e-commerce portals to sell to their own business customers. It also operates a retail e-commerce business, CPO Commerce, which sells power tools and related products on CPOOutlets.com to consumers and professional mechanics.

But while overall e-commerce sales have inched upward, they also contributed to year-over-year declines in 2017 sales in several of Essendant’s B2B product categories, including:

  • Technology products—A $9.9 million drop in e-commerce sales, along with other larger declines in sales to national and independent resellers, resulted in a 9.8% drop in technology sales to $1.218 billion, about 24% of total sales;
  • Office products—A $5.5 million drop in e-commerce sales, along with other declines in sales to resellers resulted in a 10.2% decline in office products sales to $749.2 million, about 15% of total sales;
  • Office furniture—A $7.1 million drop in e-commerce sales, along with other declines to resellers resulted in a 10.3% drop in furniture sales to $267.4 million, about 5.3% of total sales.

Essendant, No. 105 in the 2018 B2B E-Commerce 300, also noted that sales of janitorial-sanitation products, or JanSan, decreased 8.9% to $1.454 billion, more than a quarter of total sales, but didn’t break out e-commerce figures.

In the annual 10-K financial statement it filed last week, Essendant said it is facing increased competition from e-commerce businesses, including the online branches of bricks-and-mortar wholesale clubs and large retailers. In addition, price transparency driven up by competing online resellers is forcing Essendant to take a harder look at its pricing and profit margins. “This increased competition from e-commerce businesses has put competitive pressure on Essendant,” it said in the filing.

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On the plus side, Essendant said e-commerce sales of cut-sheet paper products increased by $3.4 million, contributing to a 3.0% increase in cut-sheet sales to $396.7 million, about 8.0% of total sales. It also said that sales of automotive products increased 2.4% to $312.5 million, about 63.0%of total sales, but didn’t break out e-commerce figures.

The remainder of Essendant’s consolidated net sales were composed of revenue from freight and other operations.

For the fourth quarter ended Dec. 31, Essendant reported:

  • Net sales of $1.198 billion, down 4.5% from
    $1.254 billion a year earlier;
  • Gross profit of $170.87 million, up 3.5% from $165.10 million, resulting in a profit margin of 14.3%, up from 13.2%;
  • Net loss of $1.546 million, narrowed from $2.353 million.

For the full year, Essendant reported:

  • Net sales of $5.037 billion, down 6.2% from $5.369 billion the prior year;
  • Gross profit of $706.054 million, down 7.1% from $759.861 million, resulting in a profit margin of 14.0%, down from 14.2%;
  • A net loss of $266.981 million, compared with net income of $63.852 million.

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