The Edge: Systemax Shows Strength as Best Buy’s Dark Horse Competitor

The Trading Edge with Derek HoffmanSystemax Inc (NYSE: SYX), a computer and electronics retailer, proved their growth with profits again this quarter. After hours, shares are currently priced at $14.60, a 11% increase since we first uncovered this ‘diamond in the recession rough’ in our August Premium Newsletter.

Here’s the earnings report breakdown:

Earnings per share grew 13%, or $.34 cents a share, versus $.30 cents a share in the same period a year ago.

Same store consumer sales grew 6%. Again, we’re in a recession and most retailers are showing same store declines. This is a very impressive number.

Consolidated sales grew 2% to $753.9 million in U.S. dollars. On a constant currency basis, sales grew 6%.

Consumer sales grew 10% to $426.2 million in U.S. dollars. On a constant currency basis, sales grew 12%.

Chairman and CEO Richard Leeds said, “Our consumer channels in North America reported our strongest results. We are broadening our reach in the consumer electronics market, both through our retail stores and our e-Commerce websites. We have signed leases for stores in several new markets that will open in the coming months, and we are continuing the conversion of our existing stores to our proprietary Retail 2.0 format. Circuit City has successfully reactivated many of its former customers, and sales from contributed to our overall sales growth. We remain very optimistic about the long-term possibilities for this valuable asset. As in the past, TigerDirect continues to be a market leader in the online retailing of computer and consumer electronics.”

Overall, the report was very positive and the outlook highlights growth initiatives. Contracts are being signed and expansion is evident.

As a comparable, Best Buy (NYSE: BBY) sports a market cap of $17.5 billion vs. Systemax’s market cap of $520 million. Call it David vs. Goliath right now, but give Systemax a true second look if you want a growth opportunity Best Buy presented to investors in the 90’s.

With the integration of the Circuit City assets during the fire-sale liquidation auction, the additional CompUSA stores on the way, and a growing online retailing operation with TigerDirect, clearly Systemax wants to be an emerging retail leader out of this recession and create a big splash in years to come. There may be a new Best Buy competitor coming to fill that empty retail space in your town soon, and that name just might be Systemax.

Disclosure: I own shares of SYX and it was a Wall St. Cheat Sheet Premium Newsletter pick mentioned in August at $13.20.


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