The B2B e-commerce operation of distributor Global Industrial is getting more attention these days from parent Systemax Inc.
With the completed sale last month of its profitable France-based information technology products and services e-commerce operation, Inmac WStore, Systemax is free to concentrate on its sole remaining business, its U.S.-based Industrial Products Group with its flagship e-commerce site, GlobalIndustrial.com. And with e-commerce a driving force behind its revenue generation, it has set a goal of $1 billion in annual sales in as soon as two years, Systemax CEO Larry Reinhold says.
Systemax completed a deal last month to sell Inmac WStore, to Germany-based Bechtle AG in a cash transaction valued at $264 million. Systemax, based in Port Washington, N.Y., sold Inmac WStore even though the European business unit was growing revenue and profits.
For the six months ended June 30, sales at Inmac WStore increased year over year 23.5%, to $274.9 million from $222.6 million. In comparison, the larger Industrial Products Group grew year over year 12.9% to $443.4 million from $392.9 million, while total revenue for Systemax for the same time grew 16.7% to $718.3 million to $615.5 million. Net income for the first half of the year was $32.8 million compared with a net loss of $4.7 million in the prior year.
“The definitive agreement we executed with Bechtle AG for the sale of our France IT business recognizes the substantial value we have built in France and we believe Bechtle will be a good home for our French business,” Reinhold said.
The sale of Inmac WStore followed a deal Systemax made earlier this year to sell its European Technology Products Group, which Systemax had noted was a “non-strategic and underperforming operation,” to focus on its more profitable businesses.
Now that Systemax has also sold its profitable Inmac WStore business, Reinhold says the Industrial Products Group, which sales throughout the U.S., Canada and Mexico, is primed to pick up much of the revenue Inmac WStore had contributed.
The Industrial Products Group generated about $791.8 million in revenue in 2017, accounting for 47.4% of total sales of $1.67 billion. But Reinhold says he expects IPG’s recent growth to continue and to soon reach about $1 billion in annual sales.
In an earnings conference call with stock analysts for the company’s most recent quarterly financial report, for the second quarter ended June 30, Reinhold noted that IPG “generated almost $850 million in sales revenue for the trailing 12 months” and “grew the top line organically at double-digit rates,” according to transcript of the call provided by Seeking Alpha. “If the historical, double-digit growth continues, Industrial would surpass $1 billion in revenues in the next 2 years.”
A boost from e-commerce
Much of that revenue will come from e-commerce sales. Although Systemax doesn’t break out e-commerce numbers, it has noted that self-service e-commerce sales account for a large share of total revenue. It adds that nearly all sales, including those from orders that customers place directly with sales reps or through catalogs, are supported in one way or another by e-commerce, such as when sales reps use the company’s websites to help customers research and place orders.
“With the sale of our IT business in France, Systemax will be focused on Industrial’s continued growth and performance, a business which has historically delivered strong revenue growth and generated higher margins than our operations in France,” Reinhold said on the second-quarter earnings call. “Our operations will be the industrial business in North America, which focuses on industrial supplies and MRO, markets we have served since 1949.” MRO, or maintenance, repair and operations, refers to products companies used to maintain and operate their facilities.
With proceeds of the sale of Inmac WStore, Systemax will begin a stock repurchase initiative but use a big undisclosed source of funds to grow GlobalIndustrial.com and its other B2B e-commerce businesses, which include IndustrialSupplies.com, C&H Government and Nextel Industries Inc.
“We will be solely focused on the growth of Industrial [Products Group] where we are making further investments to enhance its competitive position, expand the value we bring to our customers and position it for further success,” Reinhold said. “Industrial is a terrific business that has significantly expanded its operations, improved its profitability and has multiple growth opportunities.”
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