Electrocomponents sales fizzle in July after mixed first quarter

23rd Jul 2015 10:57

(ShareCast News) - First quarter results at Electrocomponents were a bit of a mixed bag as sales growth improved in June but margins tightened, while a slowdown reported in July dampened hopes of a recovery.Sales in the first quarter ended 30 June were up 5%, an improvement from the 4% growth in the first seven weeks of the period cited at the time of final results in May and slightly ahead of expectations.International sales, which are more than two thirds of the group, were up 7% but the UK was down 1%.The international expansion was led by continental Europe's 13% improvement, though North America was up just 3% compared to the 10% seen in the full year, and Asia Pacific flat after its 4% growth in the last year.However, in spite of an acceleration in online sales, gross margin dropped 1.7% on the same period last year, with the blame laid on the foreign exchange moves, price and discounting impacts, and a higher proportion of lower-margin products in the mix.Furthermore, chief executive Lindsley Ruth said the group had seen a slowdown in July."Europe is performing well with good double digit growth and in North America we have seen slower growth against a market backdrop of weakening US manufacturing output."There is still much to do to reinvigorate growth in the UK and Asia Pacific and to arrest the decline in gross margin."He said actions were underway to address the underperformance and he would share more detail on his plans on how to deliver a sustained improvement in financial performance with the half-year results in November.Jamie Constable at broker N+1Singer the update was "not pretty" adding that "with low global trade and low growth generally it's not a positive environment for a distributor".Analyst Robin Speakman at Shore Capital said the statement "broadly equates" to forecasts but that the improving trend at America was a little slower than hoped."Perhaps of greater concern to investors is that July is stated to have started more slowly, potentially stalling recovering growth for a period. Margins also remain a concern."