CDW Corp.'s Strong June Sales: Proof Businesses Are Starting To Loosen the Purse Strings?

by: William Trent, CFA

Earlier today I said:

Other signs are pointing to the consumer slowdown extending beyond just housing-related stores. The consumer was the last leg in the economy’s stool, so businesses had better take up the slack or we could be in for more of a slowdown than we already have.

Right on cue, we learn that CDW’s Average Daily Sales Increase 25.3 Percent in June 2007 and 24.4 Percent in the Second Quarter of 2007:

Excluding Berbee sales in June 2007, and therefore on a non-GAAP basis, CDW’s (CDWC) average daily sales for June 2007 were $31.641 million, an increase of 15.9 percent compared to average daily sales for June 2006 of $27.293 million and total sales for June 2007 were $664.5 million, an increase of 10.7 percent compared to total sales of $600.4 million for June 2006.

That is a pretty darned good number. If it is happening across the board, and not as a result of CDW gaining market share, the GDP chart for tech equipment and software spending won’t look like this for long.

click to enlarge
tech spending

If it is an industry-wide phenomenon, there are positive implications for Tech Data (NASDAQ:TECD), Ingram Micro (NYSE:IM) and Mid Cap Watch List member Synnex (NYSE:SNX) as well as for their suppliers, primarily Hewlett Packard (NYSE:HPQ).