Distributors Report Modest Sales Growth

Avnet reports year-end sales growth of 1.5%, following earlier reports of marginal growth for the first six months of the year at Arrow.

Economic growth continues at a slow pace in the electronics supply channel, as evidenced by recent earnings reports from the top two largest electronics components distributors in North America.

Despite beating analysts’ estimates this summer, Avnet Inc. and Arrow Electronics—numbers one and two, respectively, on Global Purchasing’s Top 50 Electronics Distributors report -- continued to battle the tough economic climate. Avnet reported sales growth of 1.5% for fiscal 2015, ended June 27, 2015, pointing to “global currency headwinds” that hindered growth. In constant currency—which excludes the impact of foreign currency exchange rates—Avnet’s sales grew 5.4% for the fiscal year, the company said. Avnet closed the year with $27.92 billion in sales.

In its fiscal fourth quarter, Avnet reported a nearly 4% drop in sales, though sales grew 3% in constant currency, the company said.

"Similar to the March quarter, our results were negatively impacted by the strong dollar, as organic revenue growth of 3.1% year-over-year in constant currency translated into a 3.6% decline as reported,” chief executive officer Rick Hamada said in announcing the results, adding that strong organic growth in Avnet’s electronic components business—Avnet Electronics Marketing—in Europe and Asia was offset by declines in its Technology Solutions business. “Even though currency had a negative impact on our reported results, our team executed well and generated leverage on organic growth. If you exclude the impact of changes in foreign currency exchange rates, in the June quarter we grew operating income 3.3 times faster than revenue."

Avnet’s results follow second-quarter and first-half 2015 results from Arrow Electronics, reported in mid-July. The distributor’s second-quarter sales grew 3%, but sales for the first six months of the year were up just 0.7%.

Arrow’s global components sales grew nearly 4% in the second quarter, led by growth in Asia, while sales in its enterprise computing services business grew just 1.2%, led by sales growth in the Americas. Overall sales for first six months of 2015 were up marginally for Arrow—just 0.7% compared to the same period a year ago—with sales in the global components division up just 0.8% and sales for the enterprise computing solutions business up just 0.5%.

Both companies beat Wall Street expectations in their most recent reports. Avnet reported fourth quarter net income of $158.7 million, or $1.15 per share, compared to $186.3 million, or $1.33 per share, last year. Adjusted net income was $159.5 million and adjusted earnings per share of $1.16, for the quarter. Wall Street analysts had expected earnings of around $1.08 for the quarter, according to reports. Avnet fell short on the revenue side in Q4, with a reported $6.8 billion in sales, compared with analysts’ expectations of $6.9 billion for the quarter.

Arrow reported second-quarter 2015 net income of $123.9 million, or $1.28 per share, compared to $127.9 million, or $1.27 per share, in the second quarter of 2014. Excluding certain items, net income would have been $148.9 million, or $1.54 per share, in the second quarter of 2015, the company said. Analysts had expected roughly $1.50 per share in profit for the quarter, according to reports.

Arrow’s second-quarter sales of $5.83 billion increased 3% from sales of $5.68 billion in the prior year. Second-quarter sales, adjusted for the impact of acquisitions and changes in foreign currencies, increased 3% year over year. Analysts expected revenue of $5.71 billion for the quarter, according to financial reports in July.

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